Банкеръ Weekly

Briefs

SELLER OF STATE BANKS WAITS FOR A COUNTER OFFER

BCC TO ENTER LIQUIDATION PROCEDURES IN AUTUMN By end-May the Bank Consolidation Company (BCC) will get rid of its responsibilities to UniCredito Italiano, Bank Austria and Hungary's OTP, BCC's Executive Director Nelly Kordovska told the BANKER weekly. These are the banks which purchased BULBANK, Biochim Commercial Bank and DSK Bank, respectively. When the privatisation contracts were closed, the three foreign buyers obtained the right to get from the BCC a considerable compensation if within five years they discovered in the acquired banks irregularities or liabilities about which they had not been notified prior to effecting the deals. Let's recall that in the contract with UniCredito for the sale of BULBANK (from November 2000) the BCC guarantees to undertake the compensation to the Italian bank if by end-2005 old liabilities to tax authorities are discovered in BULBANK. The same commitment, but with term of validity till the end of 2007, was undertaken by the BCC to Bank Austria. The important detail here is that only losses up to 25% of the purchase price (EUR82.5MN) paid by the Austrians for Biochim would be covered.In October 2003 the BCC signed and agreement with Hungary's OTP undertaking eventual losses from old liabilities till the year 2008 if they do not exceed 25% (EUR77.775MN) of the purchase price of EUR311.1MN, paid by OTP for DSK Bank. In the end of 2003 BCC's Board of Directors made a decision that its responsibilities to the above-mentioned foreign buyers should be transferred to the State, represented by the Finance Ministry. This was necessary in order to launch the procedure for BCC's liquidation, as August 2004 is deadline for its existence (within its 12-year history BCC's life was prolonged on eight occasions).In February 2004 Ms. Kordovska sent to UniCredito, Bank Austria and OTP letters with the draft contracts by which BCC's commitments to the buyers should be transferred to the State. The banks were expected to consider the draft contracts, make their remarks (if there are such), and return them to the BCC by end-April. However, their replies have not yet arrived at the BCC. I expect to get the letters from UniCredito, Bank Austria and OTP within two or three weeks, Ms. Kordovska said. I am not surprised by the delay because the lawyers of all the three financial institutions will certainly try to protect their interests in the best possible way. After the official answers are received at the BCC, we'll hold negotiations on the proposed amendments made by the buyers of the three banks and will hold additional negotiations with them if necessary. I hope we'll sign by end-May the trilateral agreements between the BCC, the State, and each of the three investors, Ms. Kordovska specified for the BANKER.BCC's general meeting will be invited after the completion of this procedure. Two important decisions will be made at the meeting. The first one concerns the distribution of dividend to its shareholders, and the second regards the filing of an application to the Sofia City Court for opening a procedure for BCC's liquidation. According to Ms. Kordovska, as of the end of 2000 the BCC has been setting aside some of its proceeds for provisions, by which it would cover eventual claims on the part of BULBANK's buyers. The reason is that one of the terms in the guarantee contract with UniCredito is that each year the BCC will be maintaining a certain amount of its equity capital and its deposits in banks. For the same reason money should be set aside as well for covering the guarantees, given to Bank Austria in end-2002 and to OTP in end-October 2003. It is these requirements of the guarantee agreements with the three foreign banks that did not allow both BCC's incumbent Board of Directors (chaired by the Finance Minister Milen Velchev) and its former BoD (chaired by the former finance minister Mouravey Radev till September 2001) to included all revenues from the sale of the three banks in BCC's profit.

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