Ministry gives SLS more time to clinch Slaska deal
In an effort to complete the sell-off of the nation's largest sugar holding, the Treasury Ministry last week granted Saint Louis Sucre (SLS) an additional three weeks to hammer out a final deal to purchase Slaska Spolka Cukrowa.
For almost two months, the treasury has been carrying out exclusive negotiations with SLS over the sale of upward of 51% of Slaska, which is headquartered in the Opole voivodship. In its agreement with the government, SLS was given until May 22 to close talks over the purchase of the holding. But the final sale was initially delayed due to an ongoing stalemate in talks with beet growers supplying Slaska mills, and then because of the bankruptcy of the largest of the holding's 16 mills. When the original deadline passed, the government granted an additional extension until June 12.
Now with the end of the month approaching and a final deal still in the offing, treasury officials last week gave SLS until July 10 to conclude negotiations over the purchase of Slaska.
"We want to have enough time to finish negotiating all the points necessary to close the deal," said Leszek Podstawski, director of SLS' representative office in Poland. "July 10 seems to be a safe date for both sides."
SLS is the second-largest sugar company in France and the fourth-largest in Europe. It has been actively investing in Central and Eastern Europe, and if successful in purchasing Slaska, could control 22% of the sugar market in Poland, Europe's third-largest sugar producer.
By issuing SLS the most recent extension, the ministry may have earned time to finalize agreements and shot itself in the foot. While talks over contracts with beet growers looked close to completion last week, the looming mill bankruptcy threatened to rock the privatization effort if the ministry did not come to a deal before the end of the month.
Last month, a Wroclaw court declared the bankruptcy of Slaska's largest sugar mill, Maloszyn. By 1999, Maloszyn had racked up debts of close to zl. 34 million ($8.71 million), with 1999 net losses reaching zl. 12 million ($3 million).
Bankruptcy administrators last week told a Wroclaw court that they were waiting until the end of June before pressing forward with receivership proceedings, pending the outcome of the negotiations between SLS and the treasury. Although the bankruptcy ruling is being appealed, under Polish law receivership procedures can begin from the moment insolvency is declared by a court.
"The receiver said in court that he would not make any moves until June 30 to give the treasury a chance to privatize the holding," said Andrzej Lyda, president of the Maloszyn sugar mill, who testified last week in the Wroclaw court. "If the privatization agreement is signed, all indications are that the appeal court will annul the bankruptcy decision. This is a very essential argument for the court's ruling."
To help sway the court, Maloszyn management last week submitted a letter from SLS stating that should the privatization of Slaska go through, the company plans to raise the mill's share capital by zl. 18 million ($4.3 million) so that management can pay off debts and restore the mill's solvency.
However, should negotiations continue into July, the mill could be well on the road to receivership and removed from the privatization process altogether. "The situation of Maloszyn should inspire the treasury to move fast to finalize the deal," Lyda said.
According to Podstawski, the ministry is not only under pressure to help save Maloszyn, but also to send a clear signal to the entire sugar industry, whose debts have reached upward of zl. 2 billion ($487 million). "There is pressure," Podstawski said. "The sector is waiting for a decision."
Regardless of the progress in Warsaw, since the end of May, Maloszyn workers have been camping out at the mill and preventing bankruptcy administrators from starting procedures. According to Jozef Szymczyk, chairman of the Sugar Workers Federation, the sit-in will continue until the bankruptcy ruling is withdrawn by the court.
"They'll have to take the mill over our dead bodies," Szymczyk said.
While receivers may not be able to enter the factory grounds in the short term, the court has halted the functioning of the mill as an economic entity. An advertisement in the Rzeczpospolita daily at the beginning of June not only announced the mill's bankruptcy, but also called Maloszyn creditors to start filing claims directly with receivers. Moreover, last week the Wroclaw court forbade the paying out of mill workers' salaries until the bankruptcy ruling is finalized, and banned the mill's management from traveling outside the Lower Silesian voivodship, Lyda said.
After nearly two months of negotiations, SLS and the ministry are said to be close to an agreement. While the social package for mill workers was completed last month, one of the main sticking points in the deal is the lack of an understanding between SLS and the farmers that supply Slaska with sugar beets. In an effort to speed up talks in that area and break the impasse, last week Deputy Treasury Minister Barbara Litak-Zarebska stepped in to finish negotiations on behalf of beet growers.
"Each meeting brings significant progress," Podstawski said.
In related news, progress is also being made on the sale of part of the Mazowiecka sugar holding. According to Jan Wyrowinski, a Freedom Union (UW) deputy from Torun, German sugar company Nordzucker is close to finalizing a deal to purchase a group of mills belonging to that holding in the Torun region.
Apart from the sale of Slaska, a deal for the sale of these mills would bring the treasury a bit closer to realizing its original privatization plan for the sugar industry, which has largely been on hold for much of the past year.
