The Croatian government said it will not support a restructuring plan for the country’s biggest shipbuilding group Uljanik due to the financial burden on the state and the government also doubts the plan could improve Uljanik ‘s chances of long-term survival.
If no other restructuring plan emerges soon, a Croatian commercial court will deliver a ruling on bankruptcy within weeks, threatening the loss of jobs for almost 3,000 people. Croatian Prime Minister Mr Andrej Plenkovic told a cabinet meeting that the proposed restructuring would cost the state between 7.5 billion kuna (US$1.14 billion) and 10.8 billion kuna (US$1.6 billion).
The financial exposure would be a great burden for tax payers and the government cannot support, but was still prepared to seek other solutions to keep the shipyard operational. Uljanik, which is 25% state-owned and operates two shipyards in the northern Adriatic cities of Pula and Rijeka, has been battling to stave off bankruptcy due to liquidity problems that began in 2017. Croatian newspaper Vecernji List said that around 1,800 employees had left the company over the last year. Remaining workers went on strike in late March, seeking unpaid wages. Uljanik’s management has chosen Croatian yard Brodosplit as a strategic partner to restructure its operations but the government said the plan would cost the state more than allowing the company to go bankrupt. A bankruptcy is expected to cost the Croatian state around 557 million euros (US$626.35 million). However, if the yard is forced into bankruptcy, it could open the way for a slimmed down shipbuilding business to emerge. In late March, 12 people, mostly former top managers in Uljanik, were arrested on suspicion of causing more than one billion kuna in financial damage to the company and the state budget (New Ships 13/2018). Croatia has spent more than 33 billion kuna (US$4.9 billion) in the past 25 years to save and then sell state-owned shipyards, efforts that have yielded little success. In March the country regained an investment grade rating on its government bonds from S&P Global due to its fiscal consolidation efforts of the last few years. This reduces the country’s borrowing costs. Keeping control over public finances is one of the key prerequisites for maintaining the rating as well as Croatia’s acceptance into the euro currency in the next four to five years.