Банкеръ Weekly



The agreement that allows potential buyers to participate in the privatisation of state-owned companies by using the compensation mechanism for redemption of Bulgaria's debt to the Spanish Export Credit Agency (CESCE) will be valid until October 19, 2004. The National Assembly voted for its one-year extention on February 18. The Spanish debt of the Bulgarian government arose in 1998, when the treasury committed itself to pay off debts of the bankrupt MINERALBANK to CESCE. The total amount undertaken by the budget was USD36MN (EUR28MN). Bulgaria and Spain then agreed the debt would be redeemed through the debt for property scheme. A compensatory mechanism allows investors to participate in the privatisation of Bulgarian companies by paying their price directly to the Spanish agency. In turn, CESCE reduces the size of its receivable from the Bulgarian state by the amount received. So far, this scheme has led to the payment of about 80% of Bulgaria's liabilities to the Spanish agency worth almost EUR22.5MN. Still, there are EUR5.409MN more to be paid and if this amount is not paid off through investors' participation in privatisation deals by October 19, 2004, it should be provided by the state budget in cash.The Parliament approved the agreement extention with no discussions and objections on February 18, either because the MPs realised how important it is for the country or because of the lack of interest in it. Another reason might have been the opinion of the Parliamentary Budget Commission which explained the need of ratification of the fourth extention of the term. The commission reminded that there are more investors willing to use the above-mentioned scheme and thus Bulgaria's Spanish debt may disappear.The agreement has already been used in six privatisation deals. The first one was signed in 1998, when Solvay-Sodi paid for the acquisition of the Provadia-based Geosol company, a limestone plant, and the Devnya heating plant. A year later, the scheme was applied by TBI, which acquired a 31% stake of the capital of Bulstrad. In 2002, the mechanism helped for the payment of 70% of the privatisation price of Incoms Telecom Holding and three of its subsidiaries. Then in 2003, Bulstroy-21 AD acquired 100% of the capital of Road Constructions-Veliko Turnovo EOOD by redeeming part of the Spanish debt. The most recent deal was concluded at the end of last year, when United Bulgarian Newspapers AD acquired 51% of the shares of Rodina Printing House.

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