Board maker Stromsdal files for bankruptcy

The Finnish paperboard manufacturer Stromsdal Corporation announced on Thursday that the company’s Board of Directors has decided to file for bankruptcy after failing to negotiate the financing required to continue its business operations.
     
The troubled company collapsed after receiving information from the Finnish investment consortium Primaca Partners that a letter of intent regarding a major corporate and financial restructuring had failed, due to the tight financial market situation.
      Primaca Partners had planned to give Stromsdal a EUR 5 million equity injection, which was a part of the signed and published letter of intent, but did not manage to arrange financing.
      On Thursday, the firm also received information from its main financiers Handelsbanken and the financing company Finnvera that they are not willing to pump more money into the company.
      Stromsdal reports that it has also explored other financing possibilities, but without success.
     
”This is very regrettable, but there was no other option. Primaca Partners were the only investors interested in financing Stromsdal”, says Harry Salonaho, the Chairman of the Stromsdal Board.
      Primaca Partners is a group of six partners, including Curt Lindholm, Jussi Länsiö, and Veli-Matti Mynttinen.
      According to Lindholm, it was impossible to raise the funds needed because of the financial crisis.
     
”We had a genuine interest and belief in the operation of Stromsdal and we made every effort in order to negotiate financing. Eventually we had to give up. Moreover, the situation appears to be growing worse day by day”, Lindholm notes.
     
The collapse of Stromsdal is a serious setback for the small town of Juankoski, some 60 kilometres east of Kuopio.
      The paperboard plant has belonged to its industrial scene for more than 250 years in one form or another. At present, there are around 200 employees on the payroll.
     
Even though the paperboard plant has been experiencing serious financial problems for a long time, the belief in survival has been strong. Still on Thursday, the company had two vacancies advertised on its website. However, the most recent news were related to impending layoffs of employees.
      ”It is difficult to comment on the upcoming dismissals of employees, but a notice of dismissal to the entire personnel is likely in connection with bankruptcy proceedings”, reports Salonaho.
     
The town of Juankoski has invested approximately EUR 1.3 million in the paperboard plant, and it has a 6% stake in the company through the investment and development company Juankosken kehitysmasuuni, which is owned 100 % by the town.
     
The taxes paid by Stromsdal’s employees have been around 10 % of the town’s municipal tax receipts.
      Administrative Officer Veli Leinonen from Juankoski estimates that as a consequence of the bankruptcy, the unemployment rate of the town could double, climbing to some 16 to 17 %.
      The main shareholders of Stromsdal are investment companies Atine Group and Baltiska Handels, as well as the government-owned Finnish Industry Investment Ltd.
     
Publicly traded companies extremely seldom file for bankruptcy in Finland. Prior to this, investor Kai Mäkelä’s Nobiscum, which was on the main list of the Helsinki Stock Exchange, declared bankruptcy in 1992. It had been preceded by development company Mancon in 1990.
      Reach-U Holding Corporation, which was listed on the Helsinki Stock Exchange’s Pre List, filed for bankruptcy in 2002.
     
     
FACTFILE
     
Stromsdal was founded in 1746 when an ironworks was set up in Juankoski.
     
In 1913, a board machine was added to the factory.
     
The company went public in 1989.
     
Since 2004 the company has been in serious financial difficulties.
     
In 2006, the government-owned Finnish Industry Investment injected EUR 2 million into Stromsdal, and at the same time, the company was granted an EUR 1.5 million capital loan by Finnvera.
     
As a result of a financing programme and a share issue, investors Atine Group and Baltiska Handels became the company’s major owners at the end of July 2007.


Links:
  Finnvera
  Stromsdal press release 27.11.2008: Stromsdal´s Letter of Intent regarding a major Corporate and financial restructuring has failed and the Board of Directors has decided to file for bankruptcy
  Stromsdal Corporation
  Helsinki Stock Exchange