Petro Carbo Chem petitions Romania court over Oltchim loan

13 August 2009 14:58  [Source: ICIS news]

PRAGUE (ICIS news)--Germany's Petro Carbo Chem (PCC) has asked a court in Romania to suspend the implementation of a Romanian government decision to grant chemical producer Oltchim a state loan guarantee, PCC said on Thursday.

PCC, an Oltchim activist minority shareholder, said it brought the issue to the Administrative Court of Romania because it believed the government’s decision to grant the loan guarantee was invalid.

“We're telling the court that all state guarantees for Oltchim envisaged by the Romanian state…should be notified to the European Commission for review in the same package as restructuring aid,” said Adam Lamentowicz, a project development manager with PCC.

The state guarantee would cover €49.6m ($70.8m) of a €62m loan that Oltchim intends to borrow in order to acquire Arpechim’s petrochemical unit from Romanian company Petrom.

The €49.6m is part of a package of guarantees covering around 80% of approximately €400m in loans to be borrowed by Oltchim.

“In PCC’s view, the first guarantee clearly initiates the investment plan that requires the subsequent guarantees, so the Commission should be told of this first, crucial guarantee and be allowed to perform a correct assessment of the total amount of aid to be granted under the state scheme,” Lamentowicz said.

The decision to grant the guarantee would, PCC said, trigger an investment plan committing Oltchim to spend at least €1bn, which was “fundamentally flawed from the business principle point of view” and which could eventually bankrupt indebted Oltchim.

Oltchim spokesman Silviu Pandrea said the court should be dismissive of “this latest opposition from PCC, because we have discussed the issue with the competent authorities and everybody can be assured that everything is being implemented in compliance with Romanian and European law”.

Bram Buring, an analyst with investment bank Wood & Co, said PCC certainly deserved a hearing on the point that Oltchim may not qualify for financial crisis aid, “but they may well find support in Brussels rather than Bucharest”.

The press office of the economy ministry, which is the majority shareholder in Oltchim, said it could not comment on the issue that PCC brought to the court until it received guidance from ministry officials.

Last week, PCC filed an official complaint with the European Commission Directorate General for Competition over the Romanian government’s alleged failure to notify the Commission about the initial loan guarantee.

State officials have argued that notification was not necessary because it is being provided under special temporary financial crisis provisions.

But PCC said that argument does not stand up to scrutiny, as Oltchim had clearly been in financial difficulty since well before 1 July 2008, which was the starting point for the special financial crisis scheme.

The Romanian government has notified the Commission of the subsequent loan guarantees.

($1 = €0.70)

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By: Will Conroy
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