Банкеръ Weekly



The liquidation of Sunny Beach AD will take further three or four years at least, calculated experts familiar with the company deeds. The Ministry of Economy, which owns 75% of its capital, decided to initiate proceedings in order to stop the activity of the company. It turned out that this was not a simple job. The company that once possessed the whole Sunny Beach resort, before it was sold in parts, is now facing dozens of legal procedures for land restitution, failed agreements, or arguable dismissals. Most of the cases are circulating among the Bourgas Regional Court, the Bourgas Court of Appeal, and the Supreme Court of Cassation. The three-level procedures as well as the permanent delays of the sessions because of the absence of some lawyers will certainly prolong their finalization for years.And the amounts in question are really significant. More than BGN1.5MN may be taken out of the bank accounts of Sunny Beach AD in form of sanctions for unfulfilled commitments to tour-operators. Besides, restitutional claims are causing trials for the whole western part of the resort which most probably will be won by the people who filed these claims. The local land commission has unambiguously decided that the land in this part of the resort is property of these people. Legal instances will probably make decisions in their favour, too. Moreover, there are no permanent buildings on this land and those that exist are illegal. The joint-stock company does not have a certificate for ownership of the several sites in the western zone and may lose them. This will not cause significant reduction in the value of the assets of the resort, since the arguable land is reported to cost less than BGN200,000 in the accounting reports. However, the land in question occupies 2,000 dca near the seaside. It's still unclear whether the possible deduction of the lands from Sunny Beach's capital will also reduce the company additional reserves.Because of the above-described legal problems, the representative of the Ministry of Economy (which is the majority owner) on the general meeting held on July 16 did not accept a BoD proposal for paying BGN13.7MN of the additional reserves as dividends. Yordan Yordanov, Head of the Ministry's Capital Market Department and its representative at the general meeting, supported the idea of paying just 80% of the 2001 profit (amounting to BGN27.032MN) as dividends to the shareholders. Therefore, eash share will bring to its holder a BGN11.045 dividend. Rumours saying that this was exactly what the Ministry of Economy would do circulated the capital market two weeks ago. The BANKER weekly informed about that probability immediately. Obviously, the rumours have been heard by more investors, as on July 15 the shares of the company began to lose value. Their price fell from BGN32 to BGN28 in just two days. It became clear on the meeting that Sunny Beach AD was planning to file a request in the Bourgas Regional Court in order for experts to evaluate the infrastructure of the resort which is currently owned by the company. It is of great importance for the future price of the shares, since it will reveal the value at which over 120 owners of hotels and restaurants in the tourist complex will acquire the facilities. A few months ago the infrastructure of Bulgaria's second large resort located on the Black Sea coast - Golden Sands, was estimated at BGN20MN. Sunny Beach is spread on a larger territory and already had its facilities modernized in the current year. That's why it is realistic to expect that its infrastructure will be evaluated at some BGN30MN. It's curious that private owners in Golden Sands found BGN20MN quite a high price and are still refusing to pay it. What will happen in Sunny Beach is still early to be said. However, only ten to fifteen owners appeared on the meeting with the company managers last Friday and only half of them supported the idea of buying part of the infrastructure.As the BANKER weekly wrote a few months ago, the Ministry of Economy intends to make three separate companies of the electricity distributing equipments (which will, for example, be called Sunny Beach EDF), the infrastructure (water supply system and parks, called Sunny Beach Service), and the receivables from rescheduled payments (Sunny Beach Finance). Initially, these companies will be entirely owned by the joint-stock company which will participate with an aport payment. The hotel owners will be offered a symbolic number of shares in EDF and Sunny Beach Service. After the evaluation is ready, the owners of sites will be given the privilege to acquire larger stakes first. Only then will shares be offered to other investors.In fact, hotel-keepers are even now required to pay annual installments to maintain the infrastructure. The installments total some BGN1.5MN. Most of the hotel-keepers fail to meet that requirement, however, and provoke the initiation of legal proceedings. That's why the sale of the infrastructure is still under question.The assets of Sunny Beach Finance will mainly include receivables from the sale of land on which the hotels are built. In 2002, most hotel-keepers signed agreements to buy the estates at a total price of BGN60MN. The first installments have been made - varying between 14 and 30% of the whole amount. The rest of the money is payable in seven years - until 2009. Since Sunny Beach AD's liquidation cannot be delayed by then, the receivables from sold estates have to be separated in an independent company. Its shares will be offered freely and will most probably be sold to a financial institution. But the company will not receive BGN45MN, as much as the remaining payments for the land. It will receive 30% less, for example, because this is a rescheduled revenue.Therefore, Sunny Beach AD will be caught in a delicate situation. It will report a big profit for 2002 (most of the revenues from the sold land are acknowledged to be revenues immediately, although they will be paid in the next seven years), but the amounts on its bank accounts will be small. The company reported BGN84MN in cash as of December 31, 2001. BGN34MN of them must be deducted because they were paid as dividends for the year 2000 (at the beginning of this year the shareholders were paid BGN6.89). Investments varying from BGN20MN to BGN35MN, depending on the different evaluations, were made too and money was also spent on tax payments. The company revenues (apart from the sale of land expected to bring profit in the future) amount up to BGN20MN. Therefore, the future liquidation value of Sunny Beach AD and the shares of each shareholder will depend on several events: how much will be received from the sale of the infrastructure and the receivables, how the numerous legal trials led against the joint-stock company will be settled, and how long the procedure will last. Some of these questions will be answered by Sunny Beach AD's six-month report which is to be published by end-July.

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