Brodosplit in financial crisis after losing Russian construction loans

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Brodosplit was plunged into a financial crisis when its Russian construction loans were blocked by sanctions (file photo Brodosplit)

Posted on May 9, 2022 8:41 PM by

The Maritime Executive







Brodosplit, the Croatian shipbuilder, has filed for interim bankruptcy as the company seeks a solution to the financial crisis caused by EU financial and banking sanctions against Russian institutions. Croatia’s largest industrial employer, the shipyard and its parent company DIV Group explain that this is not an operational problem but rather a loss of construction financing and an inability to conclude a financial bridge solution with the government.


The problem started for Brodosplit in early April when the EU decided to toughen financial sanctions against Russia and included VTB, a majority state-owned Russian bank and lending network, in the restrictions. Brodosplit is building two commercial projects for which it has requested 150 million euros ($159 million). The DIV has agreed to provide 30 million euros and the shipyard has taken out loans from VTB for a total of 120 million euros. In March, the shipyard had taken 82 million euros from the Russians when the loans were blocked under the sanctions. Restrictions imposed on VTB due to the war in Ukraine prevented payment of the remaining €38 million.


Initially, DIV stepped in to provide additional financial support, but they turned to the government by offering a bridge loan to the shipyard to finance the completion of the two vessels. DIV says it has also become financially overstretched to support the shipyard. Brodosplit reports that work on one of the two projects is nearing completion and they estimate it could be completed with an additional €500,000, while the second project requires around €8 million to complete the vessel which is due for delivery. at the end of the year.


The DIV reports that it has held intensive talks with the Croatian Bank for Reconstruction and Development (HBOR) to obtain a loan for Brodosplit, but has not received a response from the government to its proposal. She points out that she is not asking for a grant, but rather a loan.


“I hope they haven’t abandoned us,” a Brodosplit manager told Croatian media over the weekend. “We will survive with or without the government,” he said while saying that the company would however be “crippled” without the government loan. He pointed out that some workers have not been paid for weeks and although there have been promises of help from the Worker Protection Agency, nothing has been received. Around 600 staff had continued to work at the shipyard since last week, mostly on coastal patrol boats for the Ministry of Defense and another new building, but most of the 1,500 staff have been laid off since production halted in April .


There had been a rumor that a solution had been found with the government, but last week the finance minister said the situation was still being analyzed for the technical, legal and financial implications of guaranteeing the request of the shipyard. The shipyard notes that it was profitable in 2021, but its financial situation is complicated by EU restrictions. The yard was privatized by the government to meet EU restrictions when the country joined the EU in 2013 and the government is no longer sure what level or form of support it is allowed to provide .


In April, suppliers to the company who had not been paid asked the court about the terms of a bankruptcy filing. The shipyard and its parent company, however, have filed a pre-bankruptcy motion seeking to delay any action by creditors, as they cite claims against Croatia and ongoing discussions with the government. Last week the company was forced to file a new claim due to an omission in the first filing, while the minister said the court filing complicated an already complex situation.


Brodosplit is not the only shipping company that has found itself caught up in the impact of the sanctions. In Norway, Havila Kystruten had arranged to lease its cruise ships to Russian financial firm GTLK, also targeted by April EU sanctions. Havila’s first cruise ship, Havila Capellawas temporarily decommissioned due to issues with its insurance and ownership by the Russian company, while the shipyard granted a bridging loan so that Havila could take delivery of its second cruise ship. The company is working on refinancing while seeking exemptions from the Norwegian government.





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