Government stops repaying debts to construction firms

Industry, regional ministry at variance over remitted amount

The ministry of regional development and public works did not make any transfers in February to repay its debts to construction companies, Bulgarian Construction Chamber (BCC) executive director Ivan Boykov told the Pari daily. In January, BCC's members received BGN 39 million.

On Tuesday, regional minister Rosen Plevneliev said the ministry has transferred BGN 58 million for the first two months of the year and was willing to double the amount by the end of March.

Lost in numbers

Meanwhile, on Friday, the Pari daily received different information from the regional ministry. According to it the transfers on the last day of January and the first few days of February totalled BGN 39,562,360.07. Also, as much as BGN 59,045,411.92 was paid under the agreement with construction firms. The amount most probably includes the payments made in December for covering companies' public debts, because no money was wired in March.
To us, the money paid in the last month of 2009 for public debts is not included in the amounts due under the agreement, Valentin Zarev, deputy chairman of the Bulgarian Roads Chamber and executive director of Patinvest Engineering, pointed out. According to the document, which was signed on December 23, companies had to receive BGN 40 million in January and BGN 80 million in each of the months of February and March.

Haircut

Even companies that have not agreed to the so-called haircut have received 10% less money than they are owned, data of the Roads Chamber show. That may be a mistake or they may get the remainder with the next transfers, Zarev added. The Roads Chamber will ask its 103 members which of them have signed the 10-percent haircut agreement with the finance ministry. The data are expected by Wednesday. Until then we have to find our how much each company has received, Zarev explained.

Building firms hope to get more money by the end of March. Then they will decide on their future actions, though they will most probably not be paid the BGN 200 million debt agreed. If more than 70% of the amount is remitted, companies are likely to wait for another month to get the remainder. However, if that fails to happen, the agreement will most probably be cancelled. Then companies will have two options. One is signing a new agreement, said Boykov. The other is for each company to seek its rights in court. However, the 10-percent haircut will not be valid then, Zarev pointed out.

Down the spiral

The delayed payment of debts to contractors by the regional ministry and the Road Infrastructure Agency triggers an increase in intercompany debts. Simply because construction companies have no money to pay their subcontractors. We have delivered inert materials to road construction companies and we are still waiting for 15 or 16 of them to pay for the supplies. Some of the debts have been outstanding for more than a year, Videx executive director Valeri Mitkov said.