Jaroslav Strnad’s CE Industries is preparing to participate in the auction for bankrupt Vítkovice Heavy Machinery, of which it owns 51 percent. This unexpected move has already been approved by the insolvency creditors’ committee and subsequently by the court.
CE Industries wants to continue the production of tires and wheels for the railway industry. “For the former heavy mechanic’s division, we are considering reducing the area used and focusing on the production and assembly of large crushers for car wrecks and other goods. We could rent the remaining part of the complex, and the use for development is also at stake,” a company spokesperson said.
Although the Insolvency Act prohibits a bankrupt company’s shareholders from acquiring the debtor’s assets sold, it allows for exceptions. And if the creditors’ committee and the court judge that such conduct is in order in a particular case, the law allows it.
“Acquisition of the debtor’s assets by his original shareholders is not very common. On the other hand, it is not unique. This has also happened in further insolvency proceedings, “says Dušan Sedláček, a partner at the Havel & Partners law firm. According to him, a higher number of auction participants may ultimately lead to a higher selling price and higher satisfaction of the debtor’s creditors.
The insolvency administrator of VHM Lukáš Zrůst, or a member of the ČEZ ESCO creditors’ committee, also expressed a similar opinion. “Given that the only criterion for winning the auction is the price, the more bidders, the better,” Zrůst said, adding that the interest of the co-owner is not surprising.
“Each insolvency is unique, so cases where creditors, co-owners, suppliers or tenants, for example, are involved in the sales of industrial sites in bankruptcy,” he added.
According to Zrůst, 173 creditors registered a total of 184 claims in the current insolvency proceedings. The total amount of receivables exceeds 1.7 billion crowns.
Apart from CE Industries, so far, only the largest domestic scrap trader, Trojek, has officially expressed interest in the auction. At least in the past, however, developers were also interested in the complex. The extensive industrial Vítkovice complex has previously attracted investors from this industry.
Roughly forty hectares of industrial land were acquired from the former owner of Vítkovice, Jan Světlík, by the real estate group P3, which invests in the construction of warehouses and production halls.
VHM, which dates back to 1828, is a producer of steel and steel products. They ended in bankruptcy in 2018, when the company was still part of Světlík’s engineering holding. During the reorganization, it was taken over by Strnad and his business partner Martin Ulčák. In March this year, however, the company went bankrupt again.