OFFSHORE COMPANIES WITHDRAW FROM BANK CAPITALS
The time of offshore shareholders in Bulgarian banks is already coming to an end. For a year now they have been gradually yielding their positions to legal firms, whose owners are familiar to everyone, or to natural persons, who have been known to control openly or not one bank or another. The main reason for that kind of legalization of capital in the Bulgarian finance and credit system were the amendments to the Banks Act, passed back on September 25, 2002. They allowed the Bulgarian National Bank (BNB) the right to require detailed information about the juristic and natural persons, holding 3% or larger stakes in local credit institutions, as well as data about the owners of firms with more than 3% of a certain bank's shares. Back in October 2002, BNB's Bank Supervision Department required from the credit institutions registered in this country detailed information about the companies and persons holding such shares. Collection of that data was difficult. Initially, the employees of the Bank Supervision Department had to write a huge number of letters to the offshore firms, which were shareholders in the banks operating in Bulgaria. According to experts of the department, the replies they received cast sufficient light on the real owners of the companies in question. Most often, the answers they got from the managers of offshore firms (mainly lawyers) were that according to their local legislation the revealing of owners was regarded as a criminal offence. However, BNB's pressure on the offshore shareholders gave an effect and as of mid-2003 they began to withdraw from the capital of Bulgarian banks. INVESTBANK was the first to get rid ofthe firms with anonymous owners. In the end of October 2002 Festa Holding asked for the central bank's permission to own 63% of the shares in the credit institution, which was then called NEFTINVESTBANK. Although since the holding's existence there were rumours that it was owned by Petya Slavova, according to court registration 50% of its capital was in the hands of Prosper Company Ltd., registered in Gibraltar. Prior to filing the request to BNB Ms. Slavova cleared away that offshore firm from the holding's capital by acquiring 100% of its shares. EIBANK also got rid of the offshore companiesThis process lasted almost two years. Until March 2002 the bank's capital was distributed between several offshore firms, among them Revco Capital Market, Vankarem Ltd., Bideford Trading, Unicrosby Trading, and several foundations (e.g. Bulgarian Science and Culture).In the end of the winter of 2002, Vankarem Ltd. and Bideford Trading (registered in Cyprus) suddenly transferred their shares (representing more than 19% of the credit institution's capital, to the foundations Ecofund-Ra and Bulgarian Medicine (chaired by Tsvetelina Borislavova). One may envy them for the rich sponsors who donated them so much money as to allow them buy 19% of EIBANK's BGN20MN capital. Of course, these might be deals on the Bulgarian Stock Exchange in which one person transfers his/her shares between the companies controlled by him/her, using the same money. In fact and still more unexpectedly, the above-mentioned Vankarem Ltd. and Bideford Trading regained their shareholder participation in EIBANK by the end of 2002 (this time controlling together over 17% of the bank's capital). The operation had to make legitimate the purchase of the stakes in the bank of G.I.A. Trading, G.I.A. Trading Co. Ltd. In March 2003 Vankarem Ltd. sold 8.13% of EIBANK's capital to the Chairperson of its Supervisory Board Tsvetelina Borislavova and to the former curator of the credit institution Svetoslav Bozhilov. Thus, each of them acquired 4.065% of the credit institution's stocks. The shares of the other offshore company - Bideford Trading - which held 8.895% of EIBANK's capital, was divided between the Supervisory Board member Valentina Ivanova, the executive directors Anton Andonov and Danail Kamenov, the curator Hristina Filipova, and one of the heads of directorates - Evgeni Palyov. Rich people and big taxpayers must these people be in order to afford buying that package of shares. It should be born in mind that according to the requirements of the Bank Act, the citizen or the firm that acquires shares in a Bulgarian credit institution should have sufficient funds of their own to pay for them. And taxes are payable on that money. It is not difficult to calculate that 8.895% of the capital of par value BGN20MN is BGN1,779,000. Let's assume that each of the four managers has paid BGN445,000 for that package. Thus, the taxes to be paid to the State for such an amount exceed BGN70,000. The Kazanluk-based enterprise Runo, owned by the textile company Katex, also took part in the offshore cleaning. Runo acquired the package (4.825% of the bank's capital) of the offshore firm Mentzel Trading Ltd. And in the summer of 2003 Katex itself applied to the BNB for a permission to buy 25% of EIBANK's shares. But a problem arose in that operation when the inspectors from BNB's Bank Supervision Department found out that ... Katex was owned by itself. It turned out that over 98% of its capital was in the hands of the Pritex company, whose majority holder was Toscana 98. And the latter was controlled by Kapritex, owed by Katex. Therefore, the BNB had no grounds to allow Katex acquire a 25% stake in EIBANK. Ms. Borislavova undertook to break that vicious ring, purchasing the shares of some of the firms within that capital chain. In the autumn of 2003 Ms. Borislavova requested the central bank to permit her indirectly hold 33.89% of the credit institution's shares. In the beginning of 2004 she bought out from Pritex all Katex stocks. If she paid the par value the deal hasn't been costly, as according to the recent registrations in the Official Gazette, the shareholder capital of Katex was BGN51,000. But in March 2004 Mr. Borsilavova got a permission from BNB's Bank Supervision Department to acquire 29.825% of EIBANK's shares through that textile enterprise, and together with her personal 4.065% stake she controls 33.89% of the credit institution's capital. The structure of EIBANK's shareholder capital will become clear in a week or two, when it will be registered at the Commercial Department of the Sofia City Court. However, according to present comments within bank circles, even after the announced increase of the capital from BGN35MN to BGN40MN, more than 50% of it will remain in the hands of firms, behind which is the bank's former curator Svetoslav Bozhilov. It is said that the Katex scheme through which Ms. Borislavova acquired control of one third of the credit instituition's capital, was contrived by him. According to some financiers, however, if the NMSII remains outside of the executive power after the next parliamentary elections, the above-mentioned 33.89% package will have a new owner. In 2003Emil Kyulev legitimized as the owner of ROSEXIMBANKBNB's official reports by the end of 2002 showed there were only three firms in the credit institution's capital, where Mr. Kyulev's share participation could be traced: Contract Holding Company, Riviera AD, and Euro Kea Consulting EOOD. Over 13% of the credit institution's capital was in their hands. Another 1.5% of its shares were owned by Michael Chernoy's company M V-IN. Almost 2% were held by BP-Leasing EOOD of Evgenii Petkov. The Bulgarian firm Galloway Bulgaria EOOD, owned by the offshore company Galloway Ltd., owned a little less than 10% of ROSEXIMBANK's capital. The balance of 74.5% were distributed between eight offshore firms, among which Sivako Trading, Neoton Trading, Demexco Consulting, and MCG Holding. On August 27, 2002, the State sold 80% of the shares of the DZI AD insurance company to Contract Sofia OOD which paid EUR21.5MN for the stake. At the time of signing the deal, Emil Kyulev held 100 shares in the company of BGN5,000 par value, ROSEXIMBANK was the owner of 59,900 shares of BGN2,995,000 par, and the remaining 540,000 shares of BGN27MN par were in the hands of the UK-registered Denis Overseas Ltd. Mr. Kyulev planned to make DZI the centre of a financial group that includes DZI along with its subsidiaries and ROSEXIMBANK in which he holds the majority stake. Right after completing this operation, Mr. Kyulev filed a request to the Finance Supervision Commission and the BNB, asking them to let the insurer become owner of 60% of ROSEXIMBANK shares. The Commission extended its permission in April 2003, and in August 2003 Mr. Kyulev announced that he had acquired the stake held by Denis Overseas Ltd. in Contract Sofia. Thus, he legalized himself as the owner of 100% of DZI shares.On November 27, 2003, BNB unexpectedly allowed Bulgaria's largest insurer to acquire 50.09% of the bank's shares. In its official announcement BNB noted that DZI, along with its related companies Riviera AD, Contract Holding Company OOD, and Galloway Bulgaria, is allowed to control 69.78% of the capital of ROSEXIMBANK which is totally worth BGN40MN.New shareholders appeared in Corporate BankThe bank's shares as of December 31, 2002 were distributed among eleven companies spread everywhere from the Bahamas to Malta. These shareholders were Iris Continental Ltd, Leonard Invest Trade Ltd, Drako Holdings Ltd, Gladecross Construction, EFV International Financial Ventures, EFV European Financial Ventures, Wimond Trading Corp., Wernol Invest Trade Ltd, and Mybo. Part of the bank's capital is also owned by the German companies Steady Trade and Sussex Invest. Small stakes of the capital of Corporate Bank were also under the control of the Bulgarian companies Bromak AD and Trust Control AD.In December 2002, James Howe (who presided Corporate Bank's Supervisory Board from September 2000 to mid-June 2001) became owner of 28% of the bank's shares (as BNB allowed him to contribute the building on Garibaldi square in which the bank's headquarters are based). Thanks to that contribution, the capital of the bank was raised to BGN13.4MN, up from BGN10MN.At the beginning of spring 2003, the Bromak Financial House (owned by the Chairman of the bank's Supervisory Board Tsvetan Vassilev, according to his own words) asked the BNB for a permission to directly own 27% of the bank's shares. In July 2003, the central bank approved the operation. In the announcement made at that time the Central Bank highlighted that Bromak was related to the Victoria insurance company which was the owner of a 10% stake of Corporate Bank's capital. The reason for that relation was the fact that Tsvetan Vassilev and Yanko Ivanov, Executive Director of the bank, were members of Victoria's Supervisory Board.At the end of summer 2003, the bank shareholders decided to raise the credit institution's capital to BGN20MN. Bromak and Victoria are about to keep control over 37% of the shares. James Howe remained the owner of an 18% stake. The bank's Executive Director Yanko Ivanov is waiting for BNB's permission to acquire 10% of the commercial bank's capital. Vassilev, Chairman of Corporate Bank's Supervisory Board and owner of Bromak told the BANKER weekly that by the end of June 2004 the offshore companies would control less than 5% of the bank's capital.The International Bank for Trade and Development (IBTD) parted with the offshore shareholders, tooThe major figures in the credit institution, established in February 1991, are the brothers Plamen Bonev and Bony Bonev. Each of them has been holding about 4.98% of the bank's capital until this week. Other shareholders in the IBTD are its Executive Director Boyan Penkov and the businessman Petar Belchev from Pernik. A number of foreign companies hold up to 5% stakes, too. There are a few offshore companies among them, such as Petrofinance, Potenza Enterprises, Carina Consultants, McMadon Securities, VVV Holding Corp., and Ozark Ventures.The IBTD shareholding structure has significantly changed since April 5, 2004. As soon as Bony Bonev received permission from the central bank, he became the owner of 88.66% of the bank's capital. The remaining 11.34% of the shares are distributed among his brother Plamen Bonev, Boyan Petkov, and Petar Belchev.Unlike the above-mentioned credit institutionsFirst East International Bank (FEIB) is not eager to drive away its anonymous shareholdersAs Anna Subeva, Chairperson of the bank's Management Board, said: We are not expecting any changes in the structure of the capital. We have all types of shareholders - Bulgarian companies, individuals, offshore companies.Considering the official publications of the BNB, the biggest shareholder of the bank is the Bulgarian Dinatrade International company owned by the former national wrestling player Rahmat Sukra. Among the Bulgarian shareholders there are also the Yambolen textile enterprise and the Trud Capital privatisation fund. But most of the rest, such as Porselli Ltd., Godart Ltd., Fairmont Trading, and Deria Ltd., are offshore companies.TEXIMBANK remains in status quo, tooAs BNB official archives show, the Liechtenstein Paton Anstalt company remains its biggest shareholder, controlling 27.3% of the shareholders' capital which totals BGN10MN. The bank's founder Georgi Naidenov, who died in 1999, was the offshore company's representative in Bulgaria. After his death, his shares in the bank exceeding 30.23% were inherited by his daughters Marieta Naidenova and Pavlina Dancheva. Another 3% remained property of his wife Slavka Pavlova Naidenova. The other shareholders of the bank are the offshore companies Girlanda Trust, Etco European Trading, Parkot Trust, and Pina Trading Corp.Within a year and a half after the amendments to the Banks Act were passed in September 2002, a large number of the offshore companies had to withdraw their capitals from the credit institutions in Bulgaria. And this is a significant success, as their clients would feel much safer if they know who is in charge of the bank to which they have entrusted their money.