Банкеръ Weekly

Briefs

VENTURE INVESTMENT FUND STARTS WITH TWICE LESS CAPITAL THAN INTENDED

SEVEN CANDIDATES WILL CONTEST FOR MANAGING ITDeputy Premier Nikolay Vassilev's idea for the establishment of a state venture capital fund, which was criticized from here and there, saw some development. The offers of candidate managers of the fund were opened. The fund is expected to attract foreign capitals to Bulgaria. After the first sifting of 15 applicants those that remained in the contest are: TBIF Financial Services in partnership with Equest Partners, Raiffeisen Private Equity Management, Copernicus Capital Management, Bulgarian-American Investment Fund, EPIC, GED Capital Development, and a consortium between Time Capital Partners and Balkan Consulting Company. Thus, the expectations of the few moderate optimists came true. The seven candidates who will continue the contest were nominated on February 26 by a special commission, chaired by the Deputy Minister of Economy Sofia Kassidova. The final selection will be made after negotiations with the shortlisted candidates, due to be completed by end-March. The only thing which is clear at present is that the fund will have a two-tier management system and whoever becomes its manager will have the last word in the investment committee when money from abroad is redirected to Bulgaria. The Supervisory Board of the new structure will include a representative of the State and of the other investors as well. Judging by Ms. Kassidova's words the good news for the governors and for Deputy PM Vassilev is that the IMF no longer has reservations about the State's participation in the venture capital fund. However, one not so optimistic fact remained somewhat aside - that the fund will be established with capital of EUR25-30MN only. It turned out that most of the offers were similar and projected no more than EUR15MN own participation of the candidate mangers. So, the fund will be established with a capital of EUR25-30MN, although Mr. Vassilev's initial intention was that it would begin operation with at least BGN100MN. Afterwards, on the proposal of ministers, the State's participation was reduced to 50% of the capital. This is probably the reason for the changed attitude of the IMF, which knew very well what it would mean to set up a venture capital fund with BGN100MN form the country's fiscal reserve. One of the criteria for picking out a manager of the fund is its capacity to attract other investors. When nominating the winner its experience in the sphere of venture investments will be taken into consideration, as well as the amount of the remuneration and profit it will set aside for itself, and its reputation in the branch. As Ms. Kassidova notes, each one of these citieria will bring ceryain points to the seven shortlisted caniddate managers. Meanwhile, it became clear that the future manager will keep 20% of the profit of enterprises in which the fund has made investments (but after setting aside the guaranteed percentage for the other investors). The new structure will exist for ten years at the most and will invest only in companies, which have proved themselves (not in beginners). The presence of Austrian companies among the shortlisted candidates is most solid. EPIC is represented by its eponymous subsidiary in Bulgaria, established in 1996 for participation in the mass privatisation. EPIC Bulgaria has invested in First Investment Bank (FIB) and in the Nadezhda privatisation fund. Another respected name is that of Raiffeisen Private Equity Management. The fund is registered in Vienna an is part of Raiffeisen Banking Group. Austria's Erste Bank, which acquired 52.07% of Ceska Sporitelna in 2000, signed the reference of Copernicus Capital Management. The credit institution mentions its good cooperation with Copernicus. The latter is a Polish company that manages the Polish division of the Advent fund which is the major candidate for BTC. The European Bank for Reconstruction and Development (EBRD) participates in it.Bank Austria, which acquired Biochim Commercial Bank last summer, is one of the shareholders in GED Capital Development, registered in Spain. It is a JV, managed by the top venture capital fund on the Pireneus - Sociedad de Desarrollo Empresarial. The companies Guestlink and Acsis also hold shares in GED Capital Development.TBIF Financial Services of Netherlands, which bids in a consortium with Equest Partners, is among those that are already present on the Bulgarian market. TBIF holds 90% of TBI Lеаsing. TBI Asset Management and the investment intermediary TBI Invest are also its ownership. TBIH, registered in the Netherlands, controls Bulstrad and the pension insurance company Doverie. A major shareholder in TBIF Financial Services is Kardan OOD, which holds 46.74% of the capital through the Israeli Herfston Beheer.The other shareholders in TBI F Financial Services are Deutsche Bank through Bankers Trust Holdings with 29.76% and the EBRD which holds 23.5% of the shares. Ivo Georgiev, Executive Director of TBIF for Bulgaria, commented for the BANKER weekly that the company is ready to invest EUR25MN itself. Moreover, it projects to increase the capital to EUR100MN in a year. If TBIF becomes the manager of the fund the average amount of an investment will be between EUR4-5MN, which will be invested in the increase of capital of 12-13 companeis. The candidacy of Bulgarian-American Investment Fund (BAIF), which is well-known in Bulgaria, is not a surprise. The corporation was set up in 1991 by the the US Congress under the Act on Supporting Democracy in Eastern Europe. According to data of BAIF's management, headed by Frank Bauer, the fund has allocated venture financing of more than USD56MN to 700 Bulgarian companies in the years of its presence in Bulgaria.The consortium between Time Capital Partners and Balkan Consulting Company is also among the shortlisted candidates. The economic advisor of the NMSII Vladimir Karolev and the former analyst in JP Morgan's London office Alex Bebov are partners in the latter. The company was established in 2000 after Mr. Karolev withdrew from the Bulgarian Post-Privatisation Fund.Time Capital Partners is assisted by ING Barings Communication. Mr. Karolev announced for the BANKER that Time Capital Partners manages two of the venture capital funds of ING Bearings Communication.The consortium between Time Capital Partners and Balkan Consulting Company has proposed that the Bulgarian venture capital fund would start operations with EUR30MN initially, but it projects to increase its capital within a few years.The intrigue regarding the choice of a manager of the state's fund is yet to be entangled.

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