1998: Pay-offs and lay-offs (the year in business)

February 17: The Association of Stock Traders publishes a scathing report entitled "The Capital Market in Slovakia: Reasons for Decline and Ways Out."The document calls for improved market transparency, protection for minority shareholders, better access to company information, stronger market regulation and more provocative investment incentives for clients. On March 4, the official SAX stock market index crashes to a new all-time low of 144.27 due to the release of unimpressive preliminary 1997 corporate results and political tensions.

Members of steelmaker VSŽ's top brass found themselves in hot water after defaulting on a big loan.

February 17: The Association of Stock Traders publishes a scathing report entitled "The Capital Market in Slovakia: Reasons for Decline and Ways Out."The document calls for improved market transparency, protection for minority shareholders, better access to company information, stronger market regulation and more provocative investment incentives for clients. On March 4, the official SAX stock market index crashes to a new all-time low of 144.27 due to the release of unimpressive preliminary 1997 corporate results and political tensions.

February 20: The National Property Fund (FNM), the country's privatisation agency, sells a 97% stake in the print media distribution company PNS to Danubiaprint, a media octopus which prints most national dailies and whose management has close ties to Mečiar's HZDS. The purchase price is 410 million Sk ($11.7 million), but after promised future investments are deducted, the sum comes to 190 million Sk. Critics say the sale puts newspaper printing and distribution in the hands of the government six months before national elections.

February 25: The FNM sells a 10.23% stake in refinery giant Slovnaft to a little-known company based in northern Slovakia's Žilina, Colorin a.s. Dealers say the sale price of 620 million Sk represents a share price of 385 Sk, a fraction of the February 24 stock market closing price of 870 Sk. The European Bank for Reconstruction and Development (EBRD) has already said it wants to unload its 10% stake in Slovnaft due to the FNM's murky dealings with the company's shares.
The FNM, meanwhile, comes under heavy scrutiny after the business weekly Trend reveals in mid-February that between 1995 and 1997, the FNM sold state property for an average of only 47% of its market value.

February 27: An extraordinary shareholders' meeting (EGM) at Slovakia's largest non-financial company, steelmaker VSŽ Holding, stages a surprise personnel reshuffle. Gone are the company's president and three vice-presidents. Replacing them are Július Rezeš, son of the largest VSŽ shareholder, Alexander Rezeš, and a trio of young and inexperienced managers. The market responds badly to the changes, and VSŽ shares drop 34% in value within two weeks.
The changes come only weeks after VSŽ signs a contract with U.S. Steel Group on establishing a long-term joint venture for the production and sale of zinc-coated metal packaging sheets. The venture, which is scheduled to become operative in December 1999, brings to VSŽ 2 billion Sk ($57 million) in foreign capital.

March 30:Moody's Investors Service downgrades Slovakia's country ceiling for foreign currency bonds and notes to Ba1/NP, and its ceiling for foreign currency bank deposits to Ba2. the 'NP' in the first rating stands for "Not Prime," meaning that Slovakia has been booted out of the first division of investment rated countries. Moody's cites the high fiscal and current account deficits as reasons for the downgrades.

April 15: Dun & Bradstreet, a business information group, announces it has downgraded Slovakia's risk indicator from DB4b to DB4d. The group cites increasing foreign indebtedness, the import surcharge and political tensions in explanation of its move. The Dun & Bradstreet decision comes hard on the heels of an announcement by ratings agency Standard & Poor's, which said it was reducing Slovakia's ratings outlook to negative from stable.

April 29: An extraordinary shareholder's meeting at the troubled IRB bank approves a basic capital increase of 2 billion Sk (Ç58 million). The shares are eventually subscribed exclusively by the nation's largest insurer, Slovenská Poisťovňa (SP), which raises its stake in the bank to 66.7%. IRB has been under a caretaker administration since December 1997, due to liquidity problems.

April 29: The Statistical Office announces that first quarter trade figures show a 16.6 billion Sk trade deficit, compared to 15.4 billion Sk in the same period last year. The figures are particularly ominous in that the increase has occurred despite a 5% import surcharge, which was not in place in early 1997.

May 4: Thomson Bankwatch, a financial services company, downgrades Slovakia's soverign risk rating from BB+ to BB, citing the nation's fiscal deficit and external debt problems.

May 5: The Finance Ministry accepts an all-time high yield of 29.5% on one-year state bonds. Citing costly infrastructure projects and the almost 90 billion Sk ($2.7 billion) in old loans it must pay off in 1998, the ministry claims it has no choice but to accept the outrageous yields.

May 14: Slovakia braves poor market sentiment to issue a three-tranche multi-currency Eurobond. Worth $750 million, the issue is split into dollar, yen and mark tranches. The dollar and mark issues have five-year terms and extremely high yields - 350-360 basis points over Bunds and 360-370 b.p. over US Treasuries. Says one underwriter, "the deal offers value to retail buyers because the yield is so high, but I'm not sure they know what kind of risk they're taking on. Slovakia is a basket case."

May 18: Finance Minister Miroslav Maxon announces the government is withdrawing a controversial amendment to the law on the central bank. The measure would have strengthened the government's power over the bank, and had been harshly criticised by international financial experts.

June 9: A one year state bond auction produces average yields of 19.8%. Dealers say that the Finance Ministry, flush with the proceeds of the Eurobond issue, is trying to send the market a message.

July 1: A new government tax break takes effect, giving a ten-year tax holiday to investors who put over 1 billion Sk into a Slovak property and then invest 300 million annually thereafter. Parties who qualify must also increase production by 5% annually, and export 90% of output. The government claims it is trying to reduce the current account deficit and boost foreign investment.

Štefan Gavorník, Chief of the FNM Presidium, was fired in November.
Vladimír Hák-Profit

July 29: Steelmaker VSŽ Holding cancels a planned $150 million bond issue which had been arranged with lead managers ING Barings and Chase Manhattan. Analysts say privately that political uncertainty surrounding the September elections is scaring investors away from the issue.

August 1: The Statistical Office announces that the current account balance deficit sits at 38.4 billion Sk ($1.1 billion) for the first half of 1998. a figure that represents almost 11% of GDP.

August 3-4:The first round of a stock subscription at Slovenská Poisťovňa (SP), the nation's largest insurer, leads to accusations that companies close to the Mečiar government are trying to privatise SP. The subscription, which is to raise SP's basic capital by 375 million Sk ($10.8 million), closes on August 21. The state privatisation agency, the FNM, does not participate in buying shares, thus allowing its stake to fall from 50.5% to 40.4%, meaning that the state has lost control and the insurer has been de facto privatised. In the end, however, registration of the capital increase is blocked by shareholders at a meeting on September 4.

August 4:The Finance Ministry says that the state budget deficit has risen to 9 billion Sk at the end of July from 3.9 billion Sk at the end of June.

August 19:The Pharmaceutical Chamber declares a state of emergency in the health care sector and approves a resolution calling for patients to pay for "second catergory" or non-essential medications. The overall debt of health insurance companies to pharmacies stands at 3 billion Sk ($87 million). Tensions are relieved somewhat on September 2 when the Mečiar cabinet promises an additional 1.1 billion Sk for the sector.

August 20:National Labour Office statistics show that unemployment rose to 14.1% in July, the highest level in four years.

August 20:The new owners of aluminum giant ZSNP are introduced to the public, but investors say the mid-July sale of the company has jarred their confidence in the privatisation process. The FNM privatisation agency sold its 74% stake in ZSNP to unknown parties for 65 million Sk ($1.86 million), or 15 Sk per share. ZSNP shares were trading at around 80 Sk at the time of the sale.
With overall assets of around 20 billion Sk ($571 million), ZSNP was one of the few big privatisation plums remaining in the FNM portfolio.

September 1: ZŤS TEES Martin, a former armaments manufacturer turned machinery maker, sends home its 3,800 workers on full pay because of a shortage of contracts. Workers are recalled on september 7 after a solution is worked out with the government.

September 10:A central bank report criticises big state banks for taking inadequate measures to protect themselves from their classified loans in the first half of 1998. Although the combined assets of banks operating in Slovakia increased 5% in this period, risky receivables rose by a similar amount. The amount of these receivables covered by reserves and provisions fell from 54.4% to 53.6%.

September 17: Ratings agency Standard & Poor's cuts Slovakia's credit ratings to speculative levels from the lowest investment grade, drawing a furious reaction from the Finance Ministry. The reasons for the cuts - once again, external indebtedness, political strife, widespread corruption, state interference in the economy and a weak banking system.

September 22:Maximum accepted yields on one year state bonds hit 29.95%, the highest ever, as maturing state securities and state budget expenditures placed heavy demands on liquidity.

September 27: The victorious parties of the former opposition appeal for a moratorium on privatisation, fearing the the Mečiar cabinet will use its final days in power to give valuable state properties to friends.

September 29: The official SAX stock market index falls below 100 points for the first time in its four year history as market players wait to see the outcome of elections.

October 1: The central bank cancels the fluctuation band of the Slovak crown and abolishes its fixed regime, allowing the currency to free-fall to almost 19% below the original parity within a week. Governor Vladimír Masár says that devaluation pressures generated by elections and ratings downgrades has cost the central bank over $1 billion in defending the crown since the beginning of August.
The announcement sends short term interest rates to over 100%, while an October 6 auction of one year state bonds brings record yields of 32% interest.

October 1: The state's 34% stake in Zlatý Bažant, the country's largest brewery, is sold by the FNM privatisation agency to the Hurban trading company after a tender giving companies only six days to apply for purchase. The headquarters of the Hurban company is listed at 32 Tomášikova Street in Bratislava, the same address as the HZDS party of Premier Mečiar.

October 13:The Finance Ministry forgives the troubled IRB bank 1.4 billion Sk ($40 million) it owes in back taxes and penalties. The former opposition parties complain they will be burdened with implementing the decsion.

October 15: A shareholders meeting at state-owned insurance giant Slovenská Poisťovňa votes to change the company's statutes: a two-thirds majority of shareholders will henceforth be required to make changes to the company's supervisory board and board of directors. The changes mean that the state, which owns a 50.5% share in Poisťovňa, will no longer be able to change the firm's top managers.

October 22: A 33.4% stake in paints maker Chemolak changes hands on the Bratislava Stock Exchange. The new owners are a group known as Penta Brokers a.s., which according to analysts increases the influence in Chemolak of a group close to the Mečiar cabinet.

October 23: A shareholders meeting at steelmaker VSŽ Holding approves changes to the company's leadership and statutes, thereby cementing the positions of current supervisory board members.

October 27:The Ministry of Economy files a complaint with the Central Securities Registrar after a 34% stake in crude oil transporter petrol vanished from its account. As it transpires, the stake was awarded by a regional court to a creditor when the Minstry of Finance was unable to settle a debt of 65.5 million Sk ($1.82 million).

October 29: The FNM transfers a 42% share in engineering firm DMD Holding to a new firm, DMD Progress. The sale occurs half an hour before the Finance Ministry halts share trading, and one day before the new government is sworn in, and reduces the state's stake in DMD Holding from 60.7% to 18.8%. Following the sale, on October 30, DMD Holding buys the FNM's minority stakes in eight other engineering companies.

November 6: All top officials at the FNM privatisation agency are dismissed and replaced by a new presidium and supervisory board. The new management swears to review all privatisation decisions made under the Mečiar government.

November 9: VSŽ Holding, the country's largest non-financial company, defaults on a $35 million syndicated loan, sparking fears that the company will collapse as other banks call in their credits. The new cabinet meets with VSŽ management on November 10, and promises state help if the current management resigns en masse. VSŽ leaders refuse.

November 12: An amendment to the Law on Strategic Companies is submitted to parliament. The new law gives the state the power to make management and strategy changes at firms where it owns a simple majority share, and in effect returns control of big state-owned firms to the FNM. The law passes on November 20.

November 12: Cabinet announces that the ST state-owned telecom giant will be turned into a joint stock company on January 1, and privatised soon after.

November 16: The license of the nation's main air carrier, Slovenské Aerolínie, is revoked by the Ministry of Transport. The ministry cites the firm's unclear ownership structure and "other lasting problems" in explaining the move.

November 19: A provisional budget for 1999 is presented to parliament for approval. The cabinet, which took office only three weeks before a complete budget for 1999 had to be submitted, did not have enough time to prepare a complete version.

November 24: Premier Dzurinda announces that the state might consider buying a 24-26% stake in VSŽ which is collateralised in the state bank Slovenská Sporiteľňa. VSŽ officials say they have no information about the purchase, but on November 26, the Bratislava Stock Exchange records trading in 5.5 million VSŽ shares, over 33% of the company's share capital. Finance Minister Brigita Schmögnerová says that the trades represents an attempt by VSŽ management to repurchase its collateralised shares. The share sales are blocked by the president of the bourse on December 1.

November 25: The supervisory board of insurer Slovenská Poisťovňa is replaced at a shareholders meeting. President Karol Melocík survives an attempt to oust him, but resigns soon after.

November 26: A special shareholders meeting at Slovenská Sporiteľňa, the second largest bank, recalls the supervisory board and elects new members. The state owns a 91% stake in the bank through the FNM privatisation agency.

December 9: The Finance Ministry grabs back a 34% stake in crude oil transporter Transpetrol, which has been awarded by a regional court to a creditor on October 6. The creditor, who has since sold chunks of the stake to other minority investors, cries foul and demands 2 billion Sk ($56 million) in compensation.

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