The company said on Tuesday that the proposal for debt restructuring had been filed with the Celje District Court on Monday after Radece papir failed to receive a planned EUR 3m loan, despite guarantees from the banks.

"Due to the aggravated operating conditions, the company has established that debt restructuring with all creditors (and with cooperation of banks) is the only way to ensure smooth operation and the survival of the company in the long run," the company said in a press release.

Due to the lack of working capital, the company shut down a white paper machine on 22 September, which has caused an estimated EUR 5m drop in revenues so far. It also has EUR 11m in outstanding debt to banks.

The new EUR 17.8m PS5 paper machine, launched in October 2010, was shut down for a week this November and is still facing a longer stoppage if the company fails to secure an increase in working capital.

The company said that a deal with India, worth more than EUR 1m, will be called off if the new paper machine is shut down again. The company added that the "very survival and existence of the company and its 375 jobs depends on this deal".

The company is the main employer in the small eastern Slovenian town of Radece and its surroundings and its collapse would seriously affect the economy in the region.

The head of the in-house trade union Stane Klansek told the STA that the decision for debt restructuring had been "expected, as the banks hesitated with loans", which according to him is completely irrational.

Only the new PS5 machine currently works in the paper mill, and it is also to be shut down soon because the company has no funds even to buy material and pay electricity bills, Klansek explained.

The management maintains that there will be no lay-offs, he said, adding that the fate of the factory and its workers was in the hands of the Celje District Court.

Paper production in Radece goes back to the early 18th century when a paper mill was entered into the Hapsburg Monarchy register and its watermark stating "Ratschah" was designed.