According to a press release from Paloma, Abris said the reason for the decision was that not all suspensive conditions for the capital injection had been met by the 27 May deadline.

Paloma said it would notify the public on potential further details once it got an official notification on the contract's rescission.

The management and the supervisory board would together with the financial and legal advisers look into the possibility of potential further steps in the recapitalisation.

Paloma is in 71%-state ownership through the Slovenia Sovereign Holding with the EUR 15m recapitalisation seen as a key step in the company's privatisation.

The recapitalisation by Abris was endorsed by the shareholders in January, but some minor shareholders challenged the decision, arguing the Slovakian fund Eco Invest had made a better offer.

The Maribor District Court issued a temporary injunction, which halted the recapitalisation procedure. More than three months later, the injunction was annulled last week but only in the case of one of two shareholders that challenged the recapitalisation.

One of the 15 state-owned enterprises slated for privatisation in 2013, Paloma employs some 700 people and puts out some 70,000 tonnes of tissue paper a year.

The company, which is based in the village of Sladki Vrh near the Slovenian border with Austria, has been seeking for years a partner that would supply it with much needed fresh capital.