ONEX Technologies Group, a New York-based company credited with turning around ailing Neorion Shipyards on the Greek island of Syros, is being groomed to take over former affiliate Elefsis as well — another historic facility that could be forced into liquidation at the end of next month.
Crunched by a debt load of at least €300m ($327m) to the Greek state, lenders and suppliers, Elefsis is kept afloat by a contract with the Hellenic Navy, which is drip-feeding the yard with cash in the hope of eventually taking delivery of two much-delayed missile ship newbuildings.
However, tired of waiting, national defence minister Nikos Panagiotopoulos has warned he will stop payments on 31 March, unless the company submits a viable restructuring plan, preferably under new management.
West of Athens
Founded in 1968, Elefsis stretches over an area of 250,000 square metres that is about an hour’s drive to the west of Athens. It has three conventional floating docks, the biggest of which can handle construction, repair and modification of vessels, with a capacity of up to 120,000 dwt.
The company has been led for more than 20 years by entrepreneur Nikos Tavoularis as part of a business group that also included Neorion.
Both shipyards have struggled. Soaring labour costs after Greece joined the euro zone in 2001 eroded their competitiveness vis-a-vis rivals in neighbouring Turkey and the Balkans. Frequent labour unrest damaged Neorion, scaring away the few international clients prepared to give it business.
Strict European Union state aid rules and Greece’s crippling sovereign debt crisis made things even worse, hampering the government from keeping yards afloat through navy contracts.
As a result, Greek shiprepair business volumes collapsed from an annual €600m to barely €100m today, according to government figures.
However, things have been looking up over the last couple of years. After a long period of austerity imposed as part of an EU-led bailout, Greek labour costs dropped near to those of competitors.
State finances improved, allowing the government to resume payments for navy contracts it considers essential to keep a balance of power with Turkey, a rising regional rival.
Yard takeover
ONEX, a versatile technology group founded by Panos Xenokostas in 2004, rushed in to take advantage of the opportunity. In November last year, ONEX formally took over Neorion, breathing new life into the yard and renaming it ONEX Syros Shipyards.
Tavoularis agreed to bow out of Neorion as part of an elaborate scheme that saw him transferring his shares to an intermediate company, which then agreed with creditors on a court-mandated restructuring plan.
The scheme bore fruit quickly. Turnover at Neorion almost doubled to €35m last year and about 450 jobs were saved.
“Orders keep flowing in,” development and investment minister Adonis Georgiadis said last week.
Neorion is seeking further growth by teaming up with Israeli shipyards on specific projects.
The government now aims to arrange a similar deal with Elefsis. However, its problemsare bigger. A creditor-driven tender to find investors for the yard failed to attract any credible buyers last year, despite offering to shave €200m off the yard’s debt.
Hard bargain
A new investor coming in today would have to pay about €30m upfront to cover outstanding wages and provide cash to complete the Hellenic Navy’s two missile boats, Georgiadis said.
Most importantly, Tavoularis, an 89-year-old business veteran and former military officer, is driving a hard bargain and refuses to withdraw from the yard.
“If Mr Tavoularis doesn’t subscribe to a deal, the Greek government unfortunately won’t be able to pay a penny to the shipyards,” labour minister Yiannis Vroutsis told parliament. “That would constitute state aid and would be irregular.”
Tavoularis’ reasons for stalling are unclear. In the past, he has argued the government owed him about €12m from previous navy contracts.
However, the odds are that a compromise will be found. About 600 jobs are at stake at Elefsis. As ONEX is New York-based, the US government has been pushing Greece to see a deal through.
The matter was discussed at the White House between US President Donald Trump and Greek Prime Minister Kyriakos Mitsotakis in early January. Wilbur Ross, the US commerce secretary, has been a point man on the American side, Georgiadis said.
If ONEX manages to replicate the Neorion deal at Elefsis, it would become the biggest shipyard player in Greece.
It may become dominant if it also manages to gobble up a third problematic outfit — Hellenic Shipyard, also known as Skaramangas, Greece’s biggest and most historic shipbuilding facility founded by shipping legend Stavros Niarchos.
The Greek government and ONEX have been talking about coming to a Neorion-style solution for Skaramangas as well. However, that shipyard’s problems are even deeper than those at Elefsis.
Skaramangas’ chequered history has given rise to an almost impenetrable thicket of disputes, arbitrations and court decisions in which Greece, investors and the European Union have been suing each other over matters such as illegal state aid and breach of contractual obligations.
