The Ostrava Regional Court sent the engineering company Vítkovice Heavy Machinery (VHM) to bankruptcy. The proposal was submitted by the company itself, which wants to reorganize. Production stopped at the company last week after suppliers cut off power.
“At the moment, we will resume production next week and will work on unfinished orders for which our customers are waiting for their delivery,” said Jaromir Schmid, Chairman of the Board of VHM. According to him, supplies of heat and electricity should be resumed later this week. “According to the plan, heavy mechanics will be commissioned as the first operation, followed by a steelworks and forges,” said Schmid.
VHM stated in its insolvency petition that due to a lack of funds, it is unable to meet its obligations. They have a total of 332 creditors and debts of CZK 300 million over 30 days past due. The company’s total liabilities exceed CZK 1.2 billion.
Schmid said last week that the company must undergo significant restructuring, which will significantly reduce the number of employees. The company has about 800 employees. The Board of Directors believes the best route is to focus on the company’s profitable operations in the future and can be sold to new investors as part of a reorganization.
VHM produces steel and steel products. About 80 percent of the production is exported, mainly to the European Union. They ended up in bankruptcy two years ago, when the company still belonged to the engineering holding of the Ostrava entrepreneur Jan Světlík. During the reorganization, the company was gradually taken over by SPV VTK, the founder of the Czechoslovak Group Holding Jaroslav Strnad. By investing money in VHM and securing its financing, the company was able to resume production. It is now the majority owner of VHM Strnad holding CE Power Industries.
The Board of Directors stated there are more reasons why the company ended up in insolvency. “The company carried past burdens. Such as repayments to lenders of CZK 11 million a month, high fixed costs, underinvestment, and inability to draw bank loans and guarantees,” the company said in an insolvency proposal. After the previous reorganization, customers returned very carefully and at the cost of low or even negative margins.
The court stated that creditors now have two months to file their applications. Konreo was appointed the insolvency trustee, the same insolvency trustee as two years ago. The review procedure and the creditors’ meeting will take place in July.