Montenegro court declares country's sole aluminium plant bankrupt

A Montenegrin court on Wednesday declared the country's sole aluminium plant and a top exporter bankrupt, paving the way for its sale to repay 380 million euros ($516.67 million) of debt.

In its heyday in the late 1970s, Kombinat Aluminijuma Podgorica had 5,000 workers. With its workforce cut to a fifth and debt equalling 10 percent of the country's economic output, it has become a big burden for the government.

"KAP will be sold as a whole or part by part, that is up to the creditors," said Dragan Rakocevic, who heads the commercial court in charge of the bankruptcy procedure.

He said the selloff would start in 20 days.

Last year KAP accounted for 30 percent of Montenegro's exports, down from 40 percent in 2011, but its business was kept afloat by big state subsidies and loans it could not repay.

In July, Montenegro launched partial bankruptcy proceedings over KAP's 24-million euro ($30.8 million) debt to Deutsche Bank .

The government is KAP's biggest creditor, accounting for 148 million euros of its debt. On top of that, it issued guarantees for a 132 million euro loan and now needs to make additional borrowings to secure funds for the payment.

In 2005, KAP was sold to Russian billionaire Oleg Deripaska, but the state took back half of his 58.7 percent stake in a 2009 debt for equity swap.

The government has to stop subsidising big loss-making companies in order to make progress towards membership of the European Union, where such direct subsidies are not allowed.