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Govt Says Creditors May Provide Capital to Vegrad

Ljubljana, 26 August (STA) - The cabinet proposed to the state-run PDP restructuring fund on Thursday to raise the possibility with creditors of providing fresh capital to the insolvent builder Vegrad.

Holdings its first session following the summer break, the cabinet reviewed the developments at Vegrad, which declared insolvency on 12 August, after months of failing to pay salaries to its workers.

The cabinet established an interdepartmental task force for dealing with the issue headed by Justice Minister Ales Zalar.

Speaking after the task force's first meeting, Zalar said that the PDP would be urged to consider the possibility of asking the creditors to participate in a capital injection.

Meanwhile, Zalar said that the information on the situation provided by the PDP, which owns 29% of Vegrad (it is the second-biggest shareholder behind the holding company owned by the managers, which has 57%), suggested that there was a serious lack of information on the operations of Vegrad.

The PDP has therefore recommended to the task force to review possibilities for amending legislation so as to make public reporting by large companies mandatory regardless of whether they are listed or not.

Currently only listed companies are obligated to provide public reports on operations, but Vegrad is not listed.

Vegrad's fate now depends on the decision of the Celje District Court on insolvency proceedings. The court must decide between motions for debt restructuring and receivership.

Regardless of the decision of the court, creditors and shareholders have another option of attempting to restructure the company.

The company can be provided fresh capital by creditors should the owners fail to do so. "It is for the creditors to act in this respect," said Zalar.

The PDP will therefore be urged to bring this issue up with the creditors.

Meanwhile, Zalar said that the police and prosecution service are currently conducting a number of preliminary investigations at Vegrad on suspicion of fraud and violation of workers rights.

He said the government was not privy to all the details of ongoing investigations, which is why he could not comment further on this.

"The important thing for the government is that law enforcement bodies respond appropriately to phenomena related to Vegrad's operations."

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