September 19 (SeeNews) - Croatia's government said on Thursday it will provide state guarantees to troubled shipyard 3. Maj for a 26 million euro ($28.8 million) loan, which will help it complete a vessel ordered by Canadian firm Algoma.
The finance ministry will issue the guarantees for the loan that will be extended by state-owned development bank HBOR and/or commercial banks to finance the construction of the vessel number 733 for Algoma Central Corporation, the government said in a statement.
In order to obtain the guarantees, 3. Maj's management and supervisory boards have to agree that once the company repays 50 million kuna ($7.5 million/6.8 million euro) to HBOR to settle earlier liabilities and repays the 26 million euro loan that will be supported by the latest state guarantees, it will pay to the state budget the remainder of the proceeds from the sale of the vessel 733.
Earlier this month, HBOR approved a 150 million kuna government-guaranteed loan to 3. Maj to help it restart production and complete vessels already under construction. As a result, 3. Maj started paying last week the overdue salaries to its employees from the first tranche of the HBOR loan.
Also in September, 3. Maj signed a deal to revive a shipbuilding contract with Algoma, which the buyer cancelled last year after 3. Maj failed to meet its contractual obligations. According to local media reports, the deal is worth $36 million (32.5 million euro).
3. Maj is part of troubled shipbuilding group Uljanik, which includes another major shipyard in Croatia, Uljanik Shipyard, along with smaller subsidiaries.
In May, a Croatian court launched bankruptcy proceedings against both Uljanik Shipyard and the Uljanik Group, while 3. Maj has managed to avoid a similar fate thanks to the government support.
(1 euro = 7.39873 kuna)