Банкеръ Weekly



The holders of compensatory notes are about to regain their optimism as the Executive Director of the Privatisation Agency (PA) Apostol Apostolov announced on May 21 he had offered the Government to sell all minority stakes on the Bulgaria Stock Exchange (BSE) for non-cash means of payment. It means, for example, that 20% instead of 10% of the capital of the Bulgarian Telecommunications Company (BTC) will be bought with notes and vouchers. The decision is valid for all companies, planned to be sold on the BSE - compensatory notes will be used for payment of 30% of the capital of Navigation Maritime Bulgare (Navibulgar) and Bulgarian River Shipping, 20% of the State Insurance Institute (DZI), 13% of Bulgartabac Holding, etc. Brokers commented that even the shares of the BTC alone could consume notes of BGN300-400MN face value. The tobacco holding and Navibulgar, too, could absorb non-cash funds worth some BGN100MN, provided their market price is 25% of their face value. For comparison, agricultural vouchers are now traded at 12-13% and notes - at one point above that level.Almost all minority stakes in public companies, held by the State, will be offered in return to compensatory notes too. There are about 150 companies, in most of which the Government is controlling a small part of the capital only. If the list approved by the incumbent Cabinet includes all of these 150 companies, they will probably be divided into 15 privatisation pools. At least this is what Apostol Apostolov intends to do. Each pool will consist of a leading company, four or five companies expected to appear attractive to the investors, and a few of the so-called junk bonds. A competition will be announced for an investment intermediary of each pool. The agents will have to sell all shares of the respective company they have committed to. If they fail to do so, they will not get a remuneration. The intermediaries will be ranked by two criteria - the amount of the commission and the lowest number of compensatory notes that the candidate expects to be used for the acquisition of shares of his pool. The state-owned shares will be sold at closed tenders. Investors will bid without knowing the prices offered by their competitors. The PA will let each intermediary decide whether to offer the whole stake of BTC, for example, or sell it in parts. It's important for both the PA and the sellers to get the highest price so that more compensatory notes could be redeemed.As a whole, Mr. Apostolov's plans are received positively. However, brokers do not know where from PA's Executive Director will find 15 attractive companies to put on top of each pool. And it is still unknown whether his idea will be approved. His deputy - Ilia Vassilev, proposes that a big western investment bank be hired to mediate the privatisation. It's easy to explain his idea considering that he used to study and to work in Germany. However, Bulgarian intermediaries are wondering what more an international bank could do than they could.They are displeased because they will only be given a secondary role. That is why they support the opinion of PA's Executive Director.As to DSK Bank and the electricity distribution companies, Mr. Apostolov said he still hoped they would be included in the list for market privatisation for the current year. However, this is not so probable, he added.The Government has to approve the list of companies in the next two weeks. The investors community made a last attempt to include DSK Bank in it and to increase the offered stakes. It sent an open letter to the Bulgarian Prime-Minister Simeon Saxe-Coburg-Gotha and to the Government. The letter was supported by almost all participants in the BSE, as well as by many Bulgarians working abroad. They declared that the transparent management of large public companies could only be guaranteed by the launching of a considerable amount of shares on the market. That will play a much more important role than the keeping of a state golden share. The letter will hardly influence the ministers' decision to restrict the number of attractive companies on the BSE. It is much better to sell attractive companies through a tender. Then there are more possibilities for favouring any of the candidates. It's always easy to find reasonable arguments to support the organization of tenders - for example, to say that a strategic investor needs to be found or that the respective deal is related to the national security. However, nobody has been able to explain the reasons why the presence of minority shareholders would displease the investor who acquires 51% of the capital of a certain company.It's not clear yet if the annual list of the Government will be valid by the end of 2002 or for the period June 2002 - June 2003. The first companies that are to be sold for compensatory notes will not be offered on the BSE before September. But trading of non-cash instruments for Bulgarian levs will be launched on July 19 or 22.This will be possible if there are only few mistakes in the lists that ministries, regional councils and land commissions present to the Central Depository.

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