Банкеръ Weekly



The general meeting of the Municipal Bank shareholders held on September 12 went off smoothly. The participants played their roles just the way the BANKER weekly predicted last week. Lyubomir Pavlov, Petar Dzhorinski and Ventsislav Nikolov were dismissed from the bank's Supervisory Board. The shareholders did not relieve them of responsibility and voted in favour of not paying them remuneration for the year 2004. That was an expected move, too. The lawyer Spas Dimitrov (chairman of the DSK Bank Managing Board from the middle of 1997 until October 2001) and Dimitar Kolev (municipal councillor from Bourgas and former manager of the local Tokuda Bank branch) who was nominated by the Gergyovden political movement were appointed members of the Supervisory Board. On September 13, Dimitar Kolev was also appointed Chairman of the Municipal Bank Supervisory Board.The surprise, if any at all, resulted from the appointment of the third member of the supervision. It was expected that the post would be entrusted to the lawyer Lyubomir Angelov nominated by the Bulgarian Socialist Party (BSP). However, during the general meeting the companies from the energy sector, controlled by the businessman Hristo Kovachki and owning 26.4% of the bank's capital, presented their own candidate, Nikifor Vangelov. He is Kovachki's brother-in-law (the husband of his sister) and, according to sources familiar with the business structure of the energy boss Vangelov, he is his right hand and most confident economic adviser. The other shareholders of Municipal Bank - the Sofia municipality, its subsidiary companies and eleven more municipalities across the country which own a total 73.6% stake in the crediting institution, accepted the proposal.Vangelov's appointment confirms the strategic positions that Kovachki has in the bank as well as his intention to acquire the municipal stakes in its capital. The businessman's decisiveness to make the bank part of his business empire is also obvious from another decision taken by the general assembly which the BANKER weekly predicted, too. Kovachki's companies opposed a proposal made by representatives of the Metropolitan Municipal Council to write in the bank's statute that decisions of the general assembly are to be made by 67% of the shares and not by 75% as they are made at present. In fact, the Chairman of the Metropolitan Municipal Council Vladimir Kissyov was not surprised by how things went off. The general meeting over, he said: The refusal of the companies controlling 26.4% of the capital to vote for the change in statute that we proposed is logical and expected, considering the strategic positions they are given by their stake and the intention declared to apply for the acquisition of the Metropolitan Municipal Council stake in the bank.It's true that there will hardly be an investor who would want to buy the stake of the Metropolitan Municipality (which owns 67% of the bank's capital), provided he would not be able to take strategic decisions about its development independently. In this aspect, Kovachki's companies are in a privileged situation because once they acquire the Metropolitan Council's stake in the bank, they would control 93.4% of the capital and would be allowed to decide its future. That's why the control over that 26.4% stake in the bank seems to be decisive for the outcome of the impending battle over the acquisition of the municipal shares. In fact, it is not known whether or not there will be bidding for them or Kovachki's companies will turn out to be the only applicant buyers.According to Vladimir Kissyov, the municipality is going to sell its stake in the bank by tender, without using the services of a consultant. The present situation does not require that we waste time and spend money on choosing a specialized company to advise the Metropolitan Municipal Council on how to sell its stake in the bank, Mr. Kissyov said. However, Sofia municipal councillors are determined to part with their shares in the crediting institution. Their main reason is that the bank does not bring sufficient revenues to the municipality. Its 2004 profit amounts to BGN3MN, of which BGN1.8MN will be used to fill the bank's reserves and BGN1.2MN will be distributed as dividends. The Metropolitan Municipal Council will be paid BGN804,000 of that money. This is quite a small amount considering the money the council has invested in the bank, Mr. Kissyov added. The councillors are aware of the fact that they should not count on receiving big revenues from the bank for the capital city. In order to be competitive, the bank will have to raise its capital. That's why their decision to sell their 67% stake in it sounds logical. The question is whether the buyer of the shares, whoever it might be, will have sufficient financial resources at his disposal to make the bank a competitive player on the Bulgarian financial market or will try to resell it at profit a year or two after he acquires it.

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