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Offshore Co Acquires Buyer of Bulgaria's Bankrupt Steel Mill

Date: 21.07.2011

An offshore company, registered on the British Virgin Islands, has acquired the buyer of Bulgaria's biggest steel mill Kremikovtzi amid many question marks surrounding the deal.

"Bessian Management Limited" bought "Eltrade company", owned by 26-year-old Lachezar Varnadzhiev for BGN 20 000, shows a check in the Trade Registry.

"Bessian Management Limited" is in its turn controlled by another offshore company – "Bun Sekretarial Limited", based in Cyprus.

Bulgaria sold in April the production assets of bankrupt Kremikovtzi steel mill in a fourth auction to a newly established local company, owned by 26-year-old Varnadzhiev.

The deal was signed just a month after "Eltrade company" was established on March 8, 2011 with a capital of mere BGN 20 000, a check in the Trade Registry shows, triggering suspicions who stays behind it. It is Varnadzhiev's only company and it is supposed to be a black and colored metal dealer.

Bulgaria's privately-owned First Investment Bank (FIBank) said it had provided all the funding for Kremikovtzi steel mill, amounting to nearly BN 320 M.

Just before that the bank issued a EUR 20 M bond, which allowed it to boost its credit portfolio by more than BGN 320 M, which is exactly the price of Kremikovtzi sale deal.

The first two auctions of Kremikovtzi failed to attract any bidders last year. The price started at BGN 565 517 510, which according to trade unions and analysts is far below the market price.

The third tender for the mill's production capacities was held in February 2011, but fell though after the sole prospective bidder failed to submit a deposit.

The smelter shut down some of its furnaces in 2009 due to lack of raw materials after Ukrainian tycoon Konstyantin Zhevago canceled a deal with the plant.

It was previously owned by Pramod Mittal, the younger brother of ArcelorMittal Chief Executive Officer Lakshmi Mittal.

The mill was placed in receivership in 2008 and following failed attempts to sell it to ArcelorMittal and Konstantin Zhevago, it was declared bankrupt.

The sprawling communist-era behemoth near Sofia was declared bankrupt end of May and cleared for liquidation in June, after years of struggle with dire economic conditions, and multiple controversies about mismanagement and financial draining. In a high profile case, Alexander Tomov, former CEO of Kremikovtzi and Bulgarian football great CSKA, faced trial.

At the end of January this year Tomov was sentenced to nine years in jail by a Sofia city court for selling off plots of land owned by Kremikovtzi at well below the market price.

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