Банкеръ Weekly

Briefs

BCC TO CHOOSE ADVISOR AMONG FIVE BANKS

ABN AMRO, CITIBANK, J.P. MORGAN, CREDITANSTALT INVESTMENT BANK AND DAIWA SECURITIES TO COMPETE FOR CONSULTANTS ON DSK BANK'S PRIVATIZATIONAt last the Bank Consolidation Company (BCC) seriously took to DSK Bank's privatization. On July 11, BCC's Board of Directors picked up five banks among the 17 applied candidates for investment advisor to consult on the deal. In the so-called short list are included the Dutch ABN AMRO, the American Citibank and J. P. Morgan, the Austrian Creditanstalt Investment Bank and the Japanese Daiwa Securities. If DSK Bank is sold at a price below 120% of its total net assets, BCC will pay EUR1.8MN to the investment advisor. In case agreed price is higher, then the consultant will receive extra commission.The payment conditions concerning the investment advisor consist of two components as we are convinced that by a certain price we can easily sell the bank ourselves, explained Finance Minister Milen Velchev.Each of the five selected candidate-consultants has submitted at BCC the size of the additional commission it should like to receive in case higher sales price is agreed. Yet exact figures still remain a secret as they will seriously influence when final winner of the competition is being selected.Minister Velchev said that final decision would most proibably be announced in early September. Yet early in August representatives of the five foreign institutions will make their presentations in front of BCC's BoD. The investment advisor should consult BCC on the procedures connected with DSK Bank's privatization, should assist to its sale memorandum's preparation and last but not least should try to find the best possible buyers. The consultant also participates in offers' appraisal, in negotiations with the preferred buyer and in the preparation of the agreement for the credit institution's final sale.Four of the five selected candidate-consultants are familiar with the Bulgarian market. The investment bank J. P. Morgan was intermediary of the Bulgarian government in November, 2001, when the Eurobond issue of EUR250MN total nominal value was launched. The same bank - along with Salomon Brothers International Limited, the London subsidiary of Schroeder Salomon Smith Barney, was intermediary in the swap deal for exchanging brady bonds of USD1.327BN total nominal value with new long-term government securities for USD1.237BN. The investment bank Schroeder Salomon Smith Barney on its turn is owned by the biggest financial institution in the world - Citigroup (which opened a branch in Bulgaria in 2000).Creditanstalt Investment Bank headed the consortium which was adviser on BULBANK's privatization procedure. In 2000 BULBANK was sold to UniCredito Italiano. In the consortium also participated Credit Suisse First Boston and Arthur Andersen. The price of EUR360MN bargained by the consortium and BCC for the Bulgarian credit institution is still considered low by many bankers and financiers. Yet consultants were paid remarkably high commission. BCC evaluated their services to USD6MN which sum was immediately paid by the then deputy PM and executive director of BCC Peter Jotev. And the hand of then finance minister Muravey Radev is said to have been trembling while signing the document of payment.ABN AMRO, one of the Netherlands' largest banks, has participated in the privatisation procedures in Bulgaria too. In winter 1997, BCC started negotiations with the Dutch bankers for the management of Biochim which would later be transformed into a sales agreement. Experts from ABN AMRO investigated the condition of the Bulgarian bank (which was not so good), advised its managers on its restructuring, but did not commit themselves to directly manage the bank.ABN AMRO is interested in the Bulgarian market and has its own representative office in Bulgaria since 1998. The bank has gained experience in the privatisation of savings banks and has consulted three deals of this kind - the last of which the sale of the Slovenian savings bank. Daiwa Securities is the least known in Bulgaria. Few would now remember that Bulgaria's present deputy finance minister, Krassimir Katev, member of the BCC Board of Directors and of Biochim's Supervisory Board, worked for this company several years ago. Daiwa Securities is the London-based investment arm of the Japanese Daiwa Bank. Its assets amount to USD131.7MN as of March 31, 2002, and its capital - to USD3.6BN. In turn, Daiwa Bank is part of the Japanese Daiwa Bank Holding, which in October 2001 merged with another Japanese financial group - Asahi Bank. In April 2002 the managers of the merged groups decided to call the new structure Resona Group.

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