ZAGREB, 20 May 2022 - Pre-bankruptcy proceedings have been launched for the Brodosplit shipbuilding company, the Split-based dock confirmed to Hina on Friday.

The application for the pre-bankruptcy procedure submitted by Brodosplit itself was received by Split Commercial Court on 27 April.

According to Brodosplit's management, the company found itself in trouble financially because it could not withdraw in full two loans from the Russian VTB bank after it came under Western sanctions due to Russia's invasion of Ukraine. The loans were to be spent for the completion of two vessels and other expenses.

Pre-bankruptcy proceedings have also been proposed for Brodosplit's owner, the DIV group because it owed HRK 41.69 million as of mid-April.

During March and April, Split Commercial Court held hearings regarding 11 companies within the Split Shipbuilding Industry. 

The court has received dozens of proposals for bankruptcy proceedings against companies connected with the Split Shipbuilding Industry.

Proceedings have been launched to examine conditions for opening possible bankruptcy proceedings in another 25 companies in the group.

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ZAGREB, 4 May 2022 - Finance Minister Zdravko Marić said on Wednesday that the ministries of finance and economy had been working together to ensure secure supplies of oil, gas, electricity and other energy products.

"We have been doing that for some time. We have been affected by rising prices but we have the obligation to secure adequate and quality supplies," he said when asked about the announcement that the government would make sure the underground gas storage facility Okoli was filled, the cost of which, according to reporters, was estimated at billions of kuna.

Noting that it was necessary to be prepared for all possible circumstances and possible additional changes and deteriorated circumstances such as those in the past few weeks and months, Marić said that the model that was being worked on would certainly have some repercussions for the state budget considering energy prices, mentioning in that context gas and its higher purchase price.

"Naturally it is not in our interest for HEP (power supplier) and others to suffer losses and have problems. That is where we come in and we will take everything into consideration," he said without going into detail, adding that the model would be presented once it was finalised.

Brodosplit is a serious issue

Answering questions about the situation in the Split-based shipyard Brodosplit, Marić said that that topic was being taken seriously. "I recently said clearly that we have never turned our backs on any situation of that kind and we will not do so now. However, for something to be realised, preconditions need to be fulfilled first," he added.

At one moment, the impression was created that such situations can be resolved exclusively with a loan from the Croatian Bank for Reconstruction and Development (HBOR) and a state guarantee, Marić said, reiterating that state guarantees are taxpayers' money and that it was necessary "to take all the circumstances and preparations into consideration as well as what follows after that."

"Let the experts at HBOR obtain all the important information just like they would for any other loan for a potential client... so we can get a guarantee that the business model will continue to be tenable," said Marić.

The Brodosplit shipyard recently applied for pre-bankruptcy proceedings due to €60 million in loans from the Russian-owned VTB Europe Bank that were to be used for the construction of two ships, however, due to sanctions against Russia the dock's accounts are currently blocked.

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ZAGREB, 15 April (2022) - DIV's financial support to the Brodosplit shipyard due to the problem with the refinancing of loans from the VTB bank and the moves by suppliers are the reasons why DIV's account has been blocked, this metal processing and shipbuilding group told Hina on Friday.

It said that the loans from VTB, a bank owned by the Russian state, could not be drawn in full because of sanctions imposed on Russian banks following the Russian military invasion of Ukraine.

"That is why the financing of Brodosplit's two largest projects has been halted, and DIV has financially helped Brodosplit so that these projects would not stop," DIV said.

"We have invested €60 million of our own funds in the two projects, instead of 30 million as planned, and that has financially exhausted us. This lack of financing and our public announcement of the problem of force majeure prompted some of our suppliers to request payment of their claims, both due and not due, which has resulted in the blockade of the accounts of the DIV Group and Brodosplit," DIV told Hina.

It added that the group's total debt to external suppliers amounted to "about three weeks' worth  of their turnover", but that this force majeure problem has been going on for eight weeks now and they lack financing.

"Unfortunately, what we feared might happen has happened. DIV is a large and strong company with a large profit and large capital, so this force majeure that occurred will not much affect our operation," the group said.

Brodosplit said two weeks ago its access to €60 million had been blocked because it was financing the construction of two vessels with money from VTB Europe, a Russian-owned bank based in Frankfurt.

Asked what steps they were taking to have the blockade lifted and about talks with the Croatian Bank for Reconstruction and Development (HBOR) to secure a loan for Brodosplit, DIV said that they were "in intense communication" with the HBOR. "In case of a quick and positive outcome, Brodosplit would finish the ships in time, pay back the loans and the state guarantee, everyone would make a profit, and jobs would be preserved in this important export sector."

Only part of the VTB loans drawn

The group also commented on Finance Minister Zdravko Marić's statement on Thursday that it was not clear how the VTB loans could have affected Brodosplit's liquidity and how the sanctions against Russia could have had such an adverse effect on Brodosplit.

"The loans have been mainly used... one of the two ships concerned has even been completed," he said.

DIV said Marić was right that one ship was practically completed and the other nearing completion, adding that "about €500,000 is needed for the first one and about €8 million for the second."

DIV said the minister was partly right that that loans had mainly been paid out, adding that this is the key problem at the moment.

The two projects cost €150 million and Brodosplit planned to invest €30 million in them, DIV said, adding that the remaining €120 million had to be borrowed from VTB, of which €82 million has been paid out.

Since another €8.5 million is needed to complete the ships, Brodosplit invested an additional €29.5 million in the project for a total of €59.5 million, DIV said, adding that the restrictions imposed on VTB due to the war in Ukraine prevented the payment of the remaining €38 million.

As a result, Brodosplit and DIV had to spend an additional €29.5 million besides the €30 million already invested in the project, DIV said.

The fact that the ships are nearly finished is a strong argument for approving a loan, because the return risk is minimal, it said, adding that Brodosplit is not asking for aid but a commercial loan to finish the ships.

DIV said it was true that Brodosplit had been restructured with HRK 1.5 billion, approved by the government and the European Commission to cover its losses, and that DIV committed to covering HRK 140 million of the losses over five years.

Until 2010, Brodosplit had cost the state HRK 20 billion, while costing it nothing over the past ten years, since DIV acquired it, DIV said, adding that DIV and Brodosplit have paid HRK 3 billion into the state budget, HRK 3 billion to workers for wages and HRK 9 billion to suppliers.

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ZAGREB, 1 April (2022) - Economy Minister Tomislav Ćorić said on Friday that the government and the Croatian Bank for Reconstruction and Development are always ready to cooperate with shipyards, but "the current problems at Brodosplit are somewhat more complex" than what has been presented in the public.

Addressing the press after a conference on the National Recovery and Resilience Plan (NPOO), Ćorić said that Brodosplit had undergone successful restructuring, which had cost the state budget HRK 1.5 billion.

The minister also explained that the DIV Group, of which Brodosplit is a member, had taken the positive course, however, the progress was overshadowed by the corona crisis and the repercussions of Russia's military aggression against Ukraine.

"The issue of shipbuilding in Split is not simple and should considered from several points of view," says Ćorić, adding that he is nevertheless optimistic that Croatia's shipbuilding industry stands good chances.

The president of the management board of the DIV Group and the Brodosplit shipyard said on Thursday the company was suspending production because €60 million of its funds were currently blocked. Speaking to Hina, Tomislav Debeljak said Brodosplit was financing the building of two ships with funds from VTB Europe, a Russian-owned bank subject to considerable restrictions due to the war in Ukraine.

"The situation we are in is extremely dramatic because VTB has stopped further loan payments because of the war in Ukraine, which has blocked us," Debeljak said, noting that €60 million of the company's funds were "trapped" in those projects.

A member of the DIV Group Management Board, Darko Pappo, said today at the conference which was attended by Ćorić that that DIV was very much affected by the current situation because two major projects were financed by the Russian-owned bank, with EU sanctions against Russia having prevented the completion of the projects and their refinancing.

"We are talking about two loans amounting to €90 million, with our share totalling around €60 million. That is a huge amount of money and this has made us suspend production," Pappo said.

He added that he expected the government to make decisions fast to help the shipbuilding group overcome the situation. The executive also said that there were end-buyers for both projects, contracts on long-term lease and a repayment schedule, and that, even though state aid is not necessary, the situation requires a prompt government reaction.

The government should support DIV's proposal for the loans to be refinanced with HBOR (Croatian Bank for Reconstruction and Development) funding under commercial terms, and one of the loans should be fully repaid by the end of the year while the other would be repaid over a longer period of time, said Pappo.

"That would ensure the continuation of production and normal functioning," he said, adding that both the Brodosplit shipyard and DIV Group operate in the black and employ a large number of workers, which is why they believe the government and HBOR should step in.

Pappo recalled that the recent case of Sberbank showed that a prompt reaction by the government was possible.

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