Two investors are reportedly interested in taking over Liberty Ostrava, the largest Czech steel mill, which entered insolvency proceedings last week.

Czech Minister of Labour and Social Affairs Marian Jurecka said he knows of two "very seriously interested” investors, adding that “it cannot be ruled out that next week or the week after another will appear”.

Online news outlet Seznam Zpravy (SZ), reported earlier that defence and heavy industry conglomerate Czechoslovak Group (CSG), financial group Creditas and local regional metals company Trinecke zelezarny are among the potential investors into Liberty Ostrava.

The steelworks, owned by struggling British-based Liberty Steel,  part of industrialist Sanjeev Gupta’s GFG Alliance, has shuttered most of its production since the end of last year when its key energy provider Tameh Czech stopped supplies to the plant over missing payments.

Employees have been on paid leave since then and the company management pursued a reorganisation plan which was backed by the majority of creditors under a court moratorium protecting Liberty Ostrava against creditors.

However,  without any warning, last Friday Liberty Ostrava appeared in the insolvency registry, with stated liabilities exceeding CZK5bn.  

Liberty Steel later said that, "given the ongoing material risks and uncertainties facing Ostrava, Liberty has decided the right course of action is to initiate a sale of Ostrava’s operations and withdraw the preventative restructuring plan in order to enter into a judicial reorganisation under the Insolvency Act".

The company said the reorganisation would "provide the time and protection to undertake the sales process and further restructuring measures to stem losses".

The company blamed market conditions – namely global oversupply and historically high imports into Europe from countries which face much lower regulatory and decarbonisation costs. Soaring energy and coal prices and falling steel demand and prices following Russia’s invasion of Ukraine have hurt a sector already struggling to adapt to European Union environmental rules that reduced competitiveness compared to Asian rivals. 

It also pointed to the Czech goverment's failure to transfer emission permits to Liberty Ostrava. Relations between the British-based group and the Czech government have all but broken down, with Czech ministers accusing the indebted group of failing to communicate and of moving money out of the company to other operations.

The government has refused to run to the aid of Liberty Ostrava and now appears determined to transfer its operations to a domestic investor.

SZ’s commentator Petr Holub and editor-on-chief of Reporter magazine, pointed out that for a potential takeover, the insolvency court would first have to turn down Liberty Steel's proposed reorganisation, which could take “weeks or months”.

Jurecka made his comments after a meeting with Liberty Ostrava’s labour unions and representatives of the labour office on Tuesday, June 18, where state aid to Liberty Ostrava’s employees was discussed.  “If the plant is to re-start again then we need to keep the people, and not have them quit en masse,” Jurecka told the media.

“We view positively that strategic investors are appearing. I firmly believe that we will maintain as many workplaces as possible,” head of the labour union KOVO Roman Druco was quoted as saying by Czech Television (CT), which also cited the general director of the country’s Labour Office, Daniel Kristof, as saying that 437 employees had filed a request for salary remuneration as of Monday. Under Czech law the state can cover missed salary payments in the event of company insolvency.  

Kristof said that his office could start with the salary payments next week and estimated the costs to be around CZK1bn (€40mn). Before entering insolvency, Liberty Ostrava had around 5,000 employees, according to the reports in the Czech public media.  Unions say up to 30,000 jobs in total are dependent on the plant in what is one of Czechia’s poorest regions.