Банкеръ Weekly



The privatisation of Golden Sands' infrastructure is not at all on the agenda. There is such an idea but it is supported only by Nikolai Nedkov, Executive Director of Golden Sands AD, and by some owners of private hotels at the seaside resort. At the same time, the Ministry of Economy strongly opposes the idea.According to Mr. Nedkov, the resort's parks, alleys, water supply and sewage utilities, streets and sidewalks, should be transferred to the Varna Municipality. Under the Bulgarian Constitution, these assets are public property and it is only logical that they should be owned at least by the municipality, if not by the State, Mr. Nedkov argues. He believes the value of these assets should be deducted from the liabilities of the MEBO Zlatni under the privatisation deal for 76% of Golden Sands AD's capital, which was evaluated at a total of USD96,234,820. The buyer has so far paid only 10% of that price, and there remain four more equal installments. The first one is due in April, 2002. Seventy per cent of the aggregate price is payable in compensation instruments, and according to some information, most of the necessary instruments have been already purchased.The MEBO Zlatni is concerned that it cannot ensure the money for the payment of the installment due in April. It is worth some USD20MN, about USD6MN of which should be paid in cash. Moreover, the MEBO's liabilities include USD350,000 in default because it has failed to fulfill its investment programme for 2000. Zlatni had to invest USD700,000 in 2000 but the Ministry of Economy does not acknowledge any investments on the part of the MEBO at all. The forfeit is to be paid within 45 days. After the elapse of this term, the privatisation contract might be even revoked, a high-ranking official explained. Mr. Nedkov, however, objects the forfeit, arguing that the investment programme has been even overfullfilled by more than BGN70,000. The problem is that the money came directly from the funds of Golden Sands AD, and not from the buyer. The MEBO has obviously not conformed with the rights of small shareholders in the privatised company and treats it as a 100% its property. This is not to the liking of the new governors, who are closely connected with the capital market. The Deputy Minister of Economy Kaloyan Ninov has sent a letter to the MEBO, informing it that he does not acknowledge as its investments money from the funds of the privatised company. Golden Sands Executive Director, on his part, said for the BANKER weekly he would contest the letter, pointing out that the fulfillment of the divestment contract should be controlled by the Privatisation Agency and not by the Ministry of Economy. Yet, the default for 2000 seems nothing as compared to the coming storm, regarding investments in 2001. The privatisation contract envisions large-scale investments in the Internatonal hotel in 2001. However, it turned out that the hotel is owned by a firm, close to MG Corporation. Investents of BGN9MN were projected, and an eventual forfeit would be BGN4.5MN, to be paid in spring when significant payments under the privatisation deal are falling due as well. Mr. Nedkov acknowledged that the investment programme for 2001 has not been fulfilled. Despite the revolutionary ideas, neither the State, nor the Varna Municipality intend to acquire the resort's infrastructure against reduced privatisation installments. Another option is proposed instead. Golden Sands AD should sell the areas to the owners of hotels and the proceeds from their sale to be used for payment of the amounts under the contract with the Ministry of Economy, of the forfeits, and for fulfillment of the investment programme. However, the funds should be first of all distributed as dividend to small shareholders (owning more than 2% of Golden Sands AD's capital) and only after that used for the above purposes. The small shareholders had not received any dividends after the company's privatisation and the shares' quotations dropped below BGN3 apiece. For comparison, Sunny Beach AD quotes at BGN10 per share and distribues significant dividends every year.According to insiders of the Ministry of Economy, Golden Sands AD has at its disposal 220,000 sq m and presses the owners of hotels and restaurants, demanding from then USD130/sq m of land on which the establishments are built. The battle between Golden Sands AD and the Ministry of Economy will continue till the payment of the privatisation installment, due in April, 2002. The dispute will circle around unfulfilled investment commitments, but its is clear that the price of the battle is much higher. The question, which the general public asks now is if it will witness the first revoked privatisation deal.

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