Major glass producer axes two of its plants to stay afloat

30-09-2008

A long tradition of Bohemian glass making almost came to an end on Monday when Bohemia Crystalex Trading, the Czech Republic’s largest producer of glass, was left little choice but to consider closing down all of its four plants due to severe financial difficulties. But late Monday evening, the company struck a deal with its creditors, buying time to seek investors who could save the glassworks from going under. The deal has come at a price: two of its facilities will still close down.

Photo: CTKPhoto: CTK The global credit crunch, the strong Czech crown, and rising energy costs are blamed for the problems faced by Bohemia Crystal Trading, a company producing 90 percent of Czech glass. The company now owes nearly 3 billion crowns, or more than 170 million US dollars, and filed an insolvency request on Monday, bracing for the worst. The company is owned by private investors and the state, which has 49 percent of the shares but finance Minister Miroslav Kalousek made it clear that bailout was not an option here.

“Any intervention with public money and any saturating or taking over the debts by the state is out of the question.”

Vladimír Kubinec, photo: CTKVladimír Kubinec, photo: CTK This angered the head of the glass and porcelain workers’ labour union Vladimír Kubinec, who says the state will eventually have to assume responsibility for the employees if the plants close down.

“If someone claims that in case the state intervenes, we would be returning to socialism, let me ask, what is going on in the United States? Is that a beginning of socialism too? The government doesn’t seem to care now, but it will care alright. Unlike the other owners, the state will have to take care of the sacked employees.”

On Tuesday, the management announced that part of the company had been saved, at least for some time. The company struck a deal with its creditors and applied for moratorium under the insolvency act. Petr Smutný, from Price Waterhouse Coopers, is a consultant for Bohemia Crystalex Trading.

Photo: CTKPhoto: CTK “Both the shareholders and the management of Bohemia Crystalex Trading agreed on a moratorium, which is similar to the Chapter 11 process, for BCT – the holding and trading company, for Crystalex Nový Bor, and for Kavalier Sázava. This means that that these businesses are going to continue operation. The remaining part of the group – the glassworks in Poděbrady and Světlá are going to go through a separate process when bankruptcy trustees are going to appointed and they are going to take control over these two businesses.”

Photo: CTKPhoto: CTK In practical terms, this means that out of the four plants, two – Sklo Bohemia in Světlá nad Sázavou and Sklárny Bohemia in Poděbrady – will be closed down, with more than 1,700 layoffs. Petr Smutný says that this was inevitable so that the other two factories have at least some chance of survival.

“Last week, we were approached by a number of investors, and I mean more than ten investors, who expressed an interest in understanding the current situation, asking whether some of the businesses were to be available for sale as operating units. They expressed interest in the plants Kavalier and Crystalex which confirms that our selection of the viable business was correct.”

Bohemia Crystalex Trading, which ranks among the top ten of the world’s glass producers and annually exports some 30 billion crowns, or 1.7 billion US dollars worth of glass, will now have 90 days to find an investor, and save the company from going under for good.

30-09-2008