Банкеръ Weekly

Briefs

THE RATING OF CANDIDATES FOR DSK BANK SHOULD BE EQUAL TO BULGARIA'S

In end-August the Council of Ministers projects to transfer its 75% stake in DSK Bank to the Bank Consolidation Company (BCC), Nelly Kordovska, Executive Director of the BCC announced in an exclusive interview for the BANKER weekly. The BCC already holds the other 25% of the state-owned bank's shares and the transferrence will facilitate its privatisation.By August 16 the five candidates to act as BCC's investment consultant in the sale of DSK Bank should submit their offers. The apllicants are: the Dutch bank ABN AMRO; SchroderSalomonSmithBarney (the investment division of the US finance giant CITIGROUP); JP Morgan (one of the top US investment banks), Austria's Creditanstalt Investment Bank, and Diva Securities (the London-based investment disvision of Japan's Diva Bank).Ms. Kordovska, the agreed purchase price of EUR82.5MN for Biochim Commercial Bank exceeds more than twice its net assets. This sets a record in the process of local bank privatisation. Do you think it is due to the increased potential of the entire finance and credit sector?- I am sure that this fact has been taken into consideration and has played a significant role in Bank Austria's decision to pay such a price for Biochim's shares. But it should be born in mind that we had set very high preliminary requirements to the candidate-buyers. For the first time in this divestment procedure the BCC had laid down minimum terms. For instance, the initially asked price was BGN95MN - much higher that the maximum purchase price, offered during the previous two attempts to sell Biochim. Secondly, we had set minimum requirements regarding the net assets and transparency of the candidates' equity capital. Moreover, a very good competitive medium was created.There is one more factor, which is decisive in such deals - the so-called scarecity value of the bank. It is not a secret that that the state-owned banks in Eastern Europe, to be sold out, could be counted on your hand's fingers.Are you going to make use of this experience in the sale of DSK Bank or are you waiting for the recommendations of the investment consultant that the BCC will pick out?- Last week (on August 1 and 2) BCC's Board of Directors (BoD) listened to the presentations of the five applicants for a mediator in the sale of DSK Bank. We expect the consultant, to be chosen in end-August or the beginning of September, to say if it would be more advantageous to set a minimum selling price for DSK Bank or not. But we'll certainly set quality criteria to the candidate-buyers. They should be universal commercial banks, specialized in services to the population, and their rating should not be lower than Bulgaria's. Meanwhile, a team of the international rating agency Standard Poor's is assessing DSK Bank and I believe it will be assigned a rating by the beginning of the tender procedure.When will the BCC specify the technical indicators for rating the candidate-consultants in the DSK Bank deal?- When we considered the offers of the 12 applicants and shortlisted the five candidates, BCC's BoD revised the parameters of the consultants' remuneration. We promised a fixed amount of EUR250,000, covering the investment mediator's costs prior signing the deal. As far as the success fee is concerned, it was also revised upwards. We had initially decided that the fee would be bound with the negotiated selling price - it would be paid if DSK Bank was sold at a price, exceeding 1.2-fold its net assets. When analysing the offers, however, we got convinced that most of the caniddate-consultants expected the bank to be sold at a price about 1.5-fold higher than its net assets. Therefore, BCC's BoD decided that this ratio could be set as a threshold around which the success fee would be specified. Now we promise a remuneration of EUR1.5MN for a selling price that will be up to 1.5-fold higher than the bank's assets, and we have fixed a 2% success fee if a higher selling price is agreed. In other words, the consultants won't get more than 2% from the sale's proceeds, at that if they exceed 1.5 times DSK Bank's net assets.

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