European Commission opens state aid inquiry into Slovakia's NCHZ

02 July 2013 17:53  [Source: ICIS news]

LONDON (ICIS)--The European Commission (EC) has opened an in-depth investigation to establish whether Slovakia breached EU state aid rules by protecting carbide producer Novacke Chemicke Zavody (NCHZ) from liabilities during bankruptcy proceedings, it said on Tuesday.

The investigation would specifically examine whether the non-payment of social security contributions and other liabilities due to the Slovak state during the proceedings was in line with the state aid regulations, it added.

“The Commission's preliminary view is that Slovakia protected NCHZ from the results of standard bankruptcy proceedings through the application of the law on strategic companies,” the Commission said in a statement.

It added: “There are also indications that the decision of the creditors to continue NCHZ's operations after the expiry of [a] law [requiring trustees to ensure the continued operation of strategic companies during bankruptcy proceedings] was attributable to the State.

"The Commission will now verify whether any of these measures gave the company an economic advantage over its competitors and therefore constitute state aid. If this is the case, the Commission will then ascertain whether such state aid could be compatible under the EU guidelines on state aid for rescuing and restructuring firms in difficulty.”

NCHZ was not immediately available to comment.

The law, introduced in November 2009 and withdrawn the following month, was never applied to any company except NCHZ, which filed for bankruptcy in October 2009, the Commission said.

During the bankruptcy proceedings NCHZ, located in Novaky in northern Slovakia, did not pay social security contributions for its employees and other liabilities towards various state entities, as its revenues did not cover its operating costs, it added.

“After the expiry of the law, the creditors' committee decided to continue NCHZ's operations, although its results continued to be loss making, which led to an accumulation of public debt for the period 2009-2012,” the press release added.

The Commission advised that it also has doubts as to whether the NCHZ assets, acquired in a 2012 tender by Czech company Via Chem, were sold at the market price,  which would ensure a maximisation of revenues to satisfy the company's creditors, including the state.

The release concluded: “An analysis of the sale also indicates that the business was sold as a going concern, including the potential advantages that NHCZ received from the state. As a consequence, if the Commission finds that NCHZ received unlawful state aid, the new owner of the business could be liable to pay it back.”

As well as calcium carbide, NCHZ also makes magnesium-based reagents and produces chlorine.

By: Will Conroy
+44 20 8652 3214

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