Банкеръ Weekly

Briefs

TRAP FOR BIDDERS IN TENDERS

The new regulations for tenders and competitions, published in the Official Gazette on September 26, laid a trap for participants in open biddings. Under the new rules, prior holding the tender the candidates should file their offers, by which they are obliged to confirm the initial price. If there is not a single bidder, a new tender shall be invited and the price will be reduced by half. If onloy one candidate turns up, he will buy the establishment at the initially set price. If the bidders are two but nobody is ready to pay more than the intitial price, then none of them wins and the deposits of both of them are kept. The deposits are usually about 10% of the price, which is not a negligible amount. (So far, deposits were not returned only when a bidder did not confirm his willingness to buy the establishment even at the initial price.)In that situation, if the initial price is high (and evaluations are often such), the potential buyer will face a difficult choice. He should either miss the first tender, risking the establishment to be purchased by a rival, or take part in the tender, realizing that he might lose the deposit (if another bidder has also offered to pay the initial price).The ordinance stipulates that in cases when all candidates have offered to pay the initial price, the bidding would continue at the discretion of participants. But the provisions are not very clear. The new ordinance eliminates tenders with secret bidding, replacing them by non-presence electronic tenders. They will be held by investment intermediaries and will include only limited liability companies. Little, but substantial amendments have been made to the regulations for competitions, through which big enterprises are sold. As before, they will be held in two stages - preliminary and conclusive. After a buyer is chosen on the basis of thr final offers, negotiations for the privatisation contract will be held. If the final offers are not satisfactory, the Privatisation Agency (PA) may not demand their improvement. It will only have the right to terminate the competition. The elimination of the possibility to demand improvement of the offers is obviously a result of the vicissitudes regarding the Bulgartabac divestment deal (unsuccessful candidates then stated they were ready to offer a higher price and blamed the PA for not allowing them to do that).Another important amendment is that a deadline for closing the privatisation contract has been set - within seven days after its approval by the PA. This will reflect on the deal for the Bulgarian Telecommunications Company (BTC), for which the court ruled that the contract with Viva Ventures had been silently approved by PA's Supervisory Board.

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