State Prepares Major Bankrupt List

The government will complete a list of bankrupt enterprises by the end of the month that is likely to include as many as 1,500 large enterprises each with 1,000 workers or more, the country's top bankruptcy official said Monday. Sergei Belyayev, head of the Federal Bankruptcy Agency, told a news conference that his agency would be reviewing the finances of potentially bankrupt companies to determine the reasons for their insolvency. The agency would then decide whether to close the firm down and sell off its assets or try to sell it to an investor."We will try to find an owner that is better than the state," he said, adding that most of the insolvent companies would be from the machine-building, textile and transport industries.President Boris Yeltsin signed a bankruptcy decree last week allowing the sale of insolvent state enterprises at auctions. Belyayev said the measure would make it easier for potential investors to gain full control of a bankrupt Russian firm and would help solve the inter-enterprise debt crisis."We can now sell an enterprise to a single investor, and this is exactly what investors want," said Belyayev.The decree also allows an enterprise to be shut down following the sale of its assets, said Belyayev."If equipment is worn out and management is not too skillful, the firm probably has to be closed down and its property sold off," he said. Russia has had a bankruptcy law on its books for over a year but it has been little used. The government has feared mass layoffs and the political fallout that could result from the closing of insolvent enterprises.However, Yeltsin in recent weeks has signed a series of economic decrees designed to put economic reforms back on track, with the bankruptcy measures being his most recent and, some say, most important.Belyayev said the sale of bankrupt firms could increase investment in industry because the new regulation guaranteed that at least some part of an investment could be recouped through bankruptcy proceedings.The sale of bankrupt firms would also help solve the inter-enterprise debt crisis, he added. When a firm is auctioned off, the purchaser would have to pay out all the debts of an enterprise in a short period of time, although Belyayev declined to say what the time period would be.He acknowledged, however, that the debts would depress an enterprise's market price. "The main goal is to settle the non-payment crisis," Belyayev said. "This is vital to our economy." He said the auction price of a bankrupt firm cannot be less than 70 percent of a company's estimated charter capital as determined by new valuations now being calculated for the post-voucher privatization program.For voucher privatization, charter capital of privatized firms was determined in 1992 prices and critics blamed the State Property Committee and its head, Anatoly Chubais, for selling state property too cheaply. However, Chubais told Russian television over the weekend that during post-voucher privatization, when firms are to be sold for money beginning July 1, their assets will be re-evaluated and increased by about 12 times. The mechanism for the sale of each firm will be worked out after consultations with government institutions responsible for the particular industry, Belyayev said.The status of an enterprise's property in the bankruptcy sale remains unclear. Under the existing system, few enterprises own their property outright and instead are said to lease the property from the government. The property is, however, considered "attached" to the enterprise.But bankruptcy officials said that in some cases an investor could gain actual ownership of a bankrupt enterprise's property as part of the purchase. However, foreigners will not qualify because a separate presidential decree allowed nonresidents only to lease land for 99 years, said Georgy Tal, deputy head of the bankruptcy agency.