Industry Ministry concocts plastic surgery intervention for companies

The Industry Ministry seems to think it has found a way to both facilitate the privatisation of its subordinated companies and cut down their arrears: turning the Finance Ministry, Termoelectrica and Distrigaz into some kind of resolution agencies for financial assets.
How? The debts to the state budget and to the special funds of those companies that made “significant investments” would be converted into shares.
In the syllabus of an emergency ordinance draft, the Industry Ministry proposes that the debts of its subordinated companies should be converted into state-held stock and managed by the Finance Ministry and by the other institutions administrating the special funds. The project does not encompass the debt-ridden private companies, only those enterprises subordinated to the Industry Ministry.
Moreover, the ministry pushes for the debts held by the respective companies to the public utilities to be turned into equity, as well. Termoelectrica could thus become a large financial investment company, only the company also holds debts to the state.
The Industry Ministry would not comment on this issue.
If this mechanism is enforced, debts will be erased on paper and will turn into shares. This way, the State would merely shift its receivables out of one pocket into another, but the companies’ finances would get a makeover.
In case the converted stock is sold, the state budget will deal with the gap between the real value and the sale value.
The ministry’s initiative clashes with the preconditions the Government has pledged to meet in order to get the fourth tranche of the stand-by agreement concluded with the International Monetary Fund (IMF).
The IMF has asked for the debt-for-equity swap to be confined to special laws on preparing certain companies for privatisation.
Such conversions based on special laws were applied to Sidex, Resita Steel Mill and the Constanta Shipyard.
The emergency ordinance on the debt-for-equity swaps would also clash with regulations on debt rescheduling and exemption, which entered effect this spring and were accepted by the IMF. These regulations cover both state and private companies, with rescheduling for 67 large taxpayers approved so far.
The Finance Ministry has rejected the Industry Ministry’s proposal, which it deems as inappropriate, “considering the need for the IMF’s approval.”
The Finance Ministry argues the emergency ordinance would discriminate against the other institutions involved in the privatisation process and the local utilities providers.