Банкеръ Weekly

Briefs

AIR COMPANIES TO BE PREFERRED BIDDERS FOR BULGARIA AIR

If more than three air companies bid for the privatisation of the national air carrier Bulgarian Air, financial investors won't be allowed to take part in the bidding. This condition has been included in the updated strategy for the divestment of the airline. After the document stayed for a year in Parliament without being considered at all, in end-May 2004 the Ministry of Transport and Telecommunications withdrew it. The motive of Nikolay Vassilev, Vice Premier and Transport Minister, then was that the document should be revised due to the company's changed financial state and the situation on the global aviation market. He pointed out the increased prices of fuels. However, in the National Assembly talks were going on that the strategy was not discussed because of dissension between the Transport Ministry and the Ministry of Economy, which is responsible for privatisation in Bulgaria. In the beginning of the week Mr. Vassilev moved the new version of the strategy for discussion by the Council of Ministers. During its regular meeting on Thursday (August 19) the Cabinet approved the proposal that the divestment procedure would be held in two stages - preliminary and conclusive. The bidding price, the investment programme, the reputation and experience of the candidates will be the main criteria for evaluating them. Purchase offers for 100% of Bulgaria Air are expected from both strategic and financial investors, the Transport Ministry said. The document stipulates that a strategic investor will be a Bulgarian juristic person, registered under the Commercial Code, in which more than 50% of the capital is directly held by firms with revenues of EUR100MN-plus from aviation for the last fiscal year. Under the same document, a financial investor is a company registered in Bulgaria, in which 20% of the capital is directly owned by firms, managing financial assets of EUR200MN-plus. The other option is that such candidates hold more than EUR200MN as share participation in other financial firms. One of the main requirements of the tender is that the majority share of the buyer should be in the hands of Bulgarian natural or juristic persons or foreigners from EU member countries. The new owner of the airline shall not be permitted to change the acquired share participation in Bulgaria Air by January 1, 2007, and not allow the company's liquidation or insolvency. The investor will be also obliged to provide BGN20MN for supplementing the deposited capital to the amount of the written capital of BGN30.16MN. The MPs refused to comment on the document, pointing out they had not yet been acquainted with it. I have no idea what the new strategy projects and I cannot comment therefore, Peter Mutafchiev from Coalition for Bulgaria who is Deputy Chairman of the Parliamentary Transport Commission, told the BANKER weekly. There were fierce discussions on the strategy over the last few months, but I don't know which one of the versions was finally approved, the commission's Chairman and MP from the NMSII Yordan Mirchev said. Bulgarian Air reported a BGN1.5MN-plus profit for 2003, compared to a loss of BGN871,000 in 2002. However, the company does not have its own planes and its 18 destinations are serviced by eight leased aircraft. Nevertheless, the interest towards the national flag carrier is significant. As the BANKER has already written, among the candidates are: Air One - one of the top private Italian airlines, Austria's Lauda Аir - the controlling package of whose shares (54.6%) is owned by Austrian Airlines, and the Serbian national air carrier JAT Airlines. Hemus Air is the only domestic air company which is certain to take part in the bidding. Many of the small firms opposed the high requirements in the strategy. The main objections were against the demanded turnover of EUR100MN-plus, which is unattainable for Bulgarian airlines. However, the Transport Ministry explained that barrier could be easily passed if the small companies united in a consortium. Deputy PM Vassilev forecasts that the divestment procedure will be launched by the year-end at the latest. Prior that the document should be approved by the National Assembly. Only afterwards the Privatisation Agency will invite a tender for the sale of the Bulgarian air carrier.

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