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Business news, 18.11.2004 13:12

City Hall Plans Debt Write-Off for Palace

ice_palace The St.Petersburg Times

By Vladimir Kovalev

Staff Writer

Governor Valentina Matviyenko is ready to wipe out a $25 million debt owed to the city budget by the joint-stock company Ice Palace, the hockey arena built in St. Petersburg for the World Hockey Championship in 2000 and owned by City Hall, Legislative Assembly representatives said Friday.

To rid the Ice Palace of its debts to the city, Matviyenko has introduced an amendment to the draft city budget for 2005, proposing to issue a 704 million ruble ($25 million) subsidy to the Ice Palace that will be given to the hockey arena next year and immediately taken back as if the debt had been paid off.

The Legislative Assembly's Yabloko faction last week opposed the amendment, but failed to defeat it against the backing of the United Russia majority.

"I don't understand one thing: If they do this for the joint stock company Ice Palace, why doesn't the Kremlin issue a subsidy of the same kind to Yukos so that the company can pay back its debt?" said Boris Vishnevsky, a member of the Yabloko faction said Friday in a telephone interview.

"I really don't like this double standard," he added.

Vishnevsky said the $25 million that the city will forgo would be enough to raise financial assistance for pensioners so that they could continue to ride free on transportation in the city after free use of transportation is abolished from Jan. 1, under a federal law on replacing so-called privileges with cash payments.

Critics say the cash payments won't compensate for the privileges lost.

Vice Governor Mikhail Brodsky said Friday that in the four years since the Ice Palace was built its market value has dropped from $95 million to $35 million and its shares are worthless because of its huge debts.

Besides its debts to City Hall, the joint stock company has debts to Sberbank, Vozrozhdeniye construction company and Russian Railways, all of which have agreed to postpone payment for15 years if Matviyenko wrote off the debt to the city.

"Just imagine if one of the creditors filed a lawsuit to get the loan back," Brodsky said in a telephone interview. "In that case the Ice Palace would have faced bankruptcy proceedings, which would mean automatic arrest of the palace's bank accounts and suspension of its concert activity."

If City Hall writes off its part of the debt, the value of the Ice Palace would go up, Brodsky said

"I respect very much the deputies [from the opposition], but if we don't do this we risk losing not only the Ice Palace, but at least another $45 million [that could be gained if it is sold]," he said. "We have already lost $65 million."

Even United Russia deputies who supported City Hall are now in doubts.

"We shouldn't have rushed," Vla-dimir Yeryomenko, a lawmaker in the United Russia faction said Friday in a telephone interview.

"The reasons presented by City Hall are not very convincing," Yeryomenko said. "It looks like the interests of certain bank structures are involved in this question - Sberbank on one side and some other big bank in the region from the other. As for all these talks about bankruptcy this is just about an attempt to scare off deputies. We should have thought more about it."

News source:

(c) 2000