By Gordana Katana
BANJA LUKA, Bosnia (Reuters) - Bosnia's Serb Republic government ordered the tax authority on Saturday to launch bankruptcy procedures at the region's indebted alumina plant, majority-owned by troubled Lithuanian lender Ukio Bankas.
The decision follows a police investigation earlier this week into alleged tax evasion and irregular spending at the plant, whose majority stake-holder is controlled by Vladimir Romanov, owner of cash-strapped Scottish soccer club Hearts.
The loss-making Birac, Bosnia's sole alumina plant, is located in the eastern town of Zvornik and has been struggling to pay off mounting debts.
"What has been left of Birac is just a big wreckage," the region's Finance Minister Zoran Tegeltija told reporters.
Birac is a major employer in the Zvornik area but recorded a loss of 5.4 million Bosnian marka (2.8 million euro) in 2012, bringing total losses over an unspecified number of years to 735.3 million marka, according to a financial report it published in February on the Banja Luka Stock Exchange (BLSE).
On Friday Romanov called an assembly of Birac's shareholders and appointed a new managing board to draft and adopt a new business plan. However, he said that he did not oppose the takeover of the loss-making plant by the government.
Tegeltija said that bankruptcy procedure was the only way to determine the state of the plant and to eventually preserve production and pay off its creditors and suppliers.
He said the debts to the region's tax authority and finance ministry amounted to 17 million marka and 14 million marka, respectively. The plant also had unspecified liabilities to the regional power utility, gas distributor, railways company, a number of suppliers, as well as its employees.
While the debt to local authorities, suppliers and the workforce has been piling up, "Birac regularly allocated cash advances and paid off its liabilities to off-shore foreign companies", said Tegeltija, adding that turnover via non-resident accounts amounted to 180 million marka.
Birac, which produces mainly alumina, the intermediate material used to make aluminium, and some zeolites and hydrates used in the chemicals industry, has struggled due to falling prices for aluminium and alumina on world markets and a rise in the price of gas.
(Writing By Maja Zuvela; Editing by Susan Fenton)