Банкеръ Weekly



Foreign investments have been critically small in the first four months of the current year. They amounted to USD125.5MN. The Government's efforts to attract foreign capitals failed mainly because no significant privatisation deals were closed in Bulgaria. Agreements with foreign companies have been signed in just three cases: for the cosmetics producer Alen Mak, for the Sandanska Bistritsa cascade, and for the bearing plant which is a part of the Vazov Mechanical Engineering Works (VMZ) of Sopot. There are also some new reasons for the worse investments balance. One of them is the dispute for the USD1.008MN that the US investor Seabord Corporation claims the Bulgarian Ministry of Economy owes to it. It all began in the end of 1998, when the American company, whose shares are traded on one of the most prestigious stock exchanges overseas - AMEX, acquired 67% of the capital of the winery Vinprom-Rousse by taking part in the raise of its capital.Seabord, which registered total sales amounting to USD443MN for the first quarter of 2002, paid a USD14MN installment to the Rousse-based winery.However, it turned out that according to the agreement signed on October 8, 1998 by the then Ministry of Industry, represented by the former minister Alexander Bozhkov, and the American company, the State has committed itself to pay all liabilities of the winery above the USD9.5MN that the investor promised to pay. When Seabord took control over the company, it became clear that its debts were higher by USD1.008MN. Logically, the US investors based their claims on that agreement.The argument may be brought to international arbitration. According to the lawyers of the US company, the investors are not expected to guess what Mr. Bozhkov's rights are. On the contrary, normally Seabord should trust in the legality of what the Bulgarian State is doing, reads the letter addressed to Peter Zhotev (who succeeded Mr. Bozhkov as minister of economy) in April 2001.Besides, Mr. Bozhkov had not promised to pay any amount, but to settle the debts above USD9.5MN. If things really enter an international court, the magistrates may accept the arguments of Seabord and convict the State to pay the disputable USD1.008MN. It's curious that Alexander Bozhkov had committed to pay the additional debts above those USD9.5MN without providing benefits to the State.Senior administration in Bulgaria used to dislike the scheme for privatisation of a company through raising its capital, because the whole amount paid by the investor remained in the respective company and there was nothing left for the Treasury. In most of these cases the state assets were actually drained. The deal for the Rousse-based winery is of a different kind, because it attracted one of the few strategic investors in Bulgaria.The state received USD3.2MN (of which 60% in ZUNK bonds) for the sale of 22.4% of the capital of Vinprom-Rousse in February 1999. That is why the balance of the plant's privatisation appears positive, regardless of the outcome of the current disputes.If the State is forced to pay the debt, the effect of the deal will be considerably reduced. It will turn out that due to the privatisation of Vinprom-Rousse the Treasury will have received USD1.28MN in cash (the other USD1.92MN from the sale of the minority stake served for the payment of ZUNK bonds) and will have paid USD1.008MN. Finally, after the State quits the management of one of Bulgaria's largest wineries, its profit will only amount to USD272,000.

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