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. Last Updated: 07/27/2016

AssiDoman Gets Offers for Mill Stake

Swedish forestry group AssiDoman says it has already received several offers from Russian buyers for its 57 percent stake in Segezhabumprom, the pulp and paper mill from which it announced its withdrawal this week.

Lennart Ahlgren, president and chief executive of AssiDoman, said in a letter sent Thursday to the head of the region of Karelia that "a number of private Russian companies have already approached us with proposals." He said Morgan Grenfell would help AssiDoman prepare the sale.

AssiDoman announced Thursday it would withdraw from Segezhabumprom because of bureaucratic and financial problems and was "investigating the alternatives for a divestment or a transfer of the shares."

The Swedish company simultaneously recorded an extraordinary $71 million write-off in the last quarter of 1997, reflecting the losses on its $54 million investment in Segezhabumprom shares and also on $22 million loan guarantees to the company.

The Swedish management of Segezhabumprom formally resigned and a Russian team was appointed at a board meeting Wednesday.

Yevgeni Stasuk, acting general director, said Friday in a telephone interview that he planned to use reserves of finishedproducts to bring in timber and oil supplies to restart operations. The plant was closed Jan. 8 after AssiDoman declared it would not provide any more working capital.

"We have a short-term plan of action to restart the plant by mid-March," Stasuk said. "But we will feel confident only when the ownership issue is definitely settled."

He called on the federal government to intervene to settle the question of what would happen to AssiDoman's shares.

Yuri Shleikin, a spokesman for the Karelian government, said Friday that the government of Karelia was considering several alternatives for Segezhabumprom, including outside management.

AssiDoman acquired a 57 percent stake in the Segezhabumprom through its wholly owned subsidiary, Stratton Paper. The remaining shares were held by small shareholders, the government of Karelia with 20 percent and Upak, the plant's former distributor, with 10 percent. The pulp, paper and paper sack conglomerate has 5,500 employees and the capacity to produce 250,000 tons of sack paper a year.

Since first buying into the plant in 1996, AssiDoman had tried in vain to restructure millions of dollars in federal debts. Such a deal was a precondition for raising up to $100 million in international financing.

But despite talks with top officials, including President Boris Yeltsin, AssiDoman failed to convince the government to reschedule the debts or to open Segezhabumprom's bank accounts which had been blocked because of the back taxes.

AssiDoman had proposed using its Segezhabumprom stock as collateral for the debt rescheduling but the deal fell through in November after First Deputy Prime Minister Anatoly Chubais lost his post as finance minister. AssiDoman also tried to convince Deputy Prime Minister Boris Nemtsov to approve $60 million in short-term financing.

"We underestimated the problems with Russian bureaucracy and the difficulties caused by former managers and partners," Lennart Ahlgren, president of AssiDoman, said Thursday.