Банкеръ Weekly



Even before the Cabinet of Simeon Saxe-Coburg-Gotha took over the country's government, the intentions of the National Movement Simeon II (NMSII) for revision of some privatisation deals, began to be realized.
In the end of last week a 3-member jury of the Supreme Administartive Court (SAC) pronounced illegal the sale of 60% of Elenite Black Sea resort. The lawsuit was instituted by one of failed candidate buyers - the management-employee buyout company (MEBO) Elenite Tours. Although the MEBO offered the highest purchase price (USD 9.1MN) for the attractive seaside resort (privatized in June 1999) and even signed a preliminary contract, its offer was excluded from the rating after Privatisation Agency (PA) officials found that two of its shareholders had quit the company. Therefore, the other MEBO - Elenite Invest - was nominated to buy the resort, in spite of the fact that it offered only USD7MN for the majority package of shares in the holiday village.
KPMG-Barents Group-United Consulting, which was brokering the deal, rated Elenite Invest second by other indicators as well - investments and working positions. The failed bidder was also proposing to pay off the entire price within seven years, while the winner's offer projected to do that in 10 years. On top of all, Elenite Invest, behind which the former head of the parliamentary Budgetary Commission Yordan Tsonev allegedly stood, paid only 10% of the purchase price in cash, and the remaining 90% - in compensatory notes. All this, however, did not seem to have impressed PA's then executive director Zahari Zhelyazkov very much. But magistrates found the claim filed by Elenite Tours reasonable.
During the week the PA announced it had not yet received SAC's official ruling, but would certainly lay a claim at a court of higher instance. In that case, the dusputable case is hardly likely to be settled before the autumn. However, it should be born in mind that the PA will be already headed by a person from the NMSII. Representatives of NSMII's economic team said to the BANKER weekly that the divestment deal on Elenite would be among the first ones to be revised. So it may well happen that PA's future head withdraws the claim. In that way the resort will become the first nationalized entity after the new Cabinet's coming into power.
But it will be more interesting from there on. The PA will have to return the USD7MN, paid by Elenite Invest. But 90% of the price was paid in compensatory notes and it is not yet known how they could be returned. According to lawyers, the USD6.3MN should be paid to the MEBO in cash at the current rate of the compensation instruments of payment. In other words, if it is accepted that the compensatory notes will cost 20% of their par value in a few months, the PA will have to pay to the MEBO USD1,260,000 in cash.
According to the then consultant in the deal Vladimir Karolev (now an economist of NMSII's team), the revocation of the deal would create a mess. Mr. Karolev believes that the easiest way out of the situation is to close a trilateral agreement between Elenite Invest, Elenite Tours, and the PA. Before that the amount to be paid by the new winner to the present owner of Elenite should be evaluated. The amount will, of course, depend on the investments made by Elenite Invest over the last two years, and on the amount of money taken out from the company within the same period.

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