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FNM makes great deal with itself

The National Property Fund (FNM) made a great deal for itself. In a two-round anonymous auction through the RM-System between July 7 and August 4, the privatization agency got rid of 172,395 more or less lousy shares from its portfolio with an average share price of 68 Sk, and earned back those bonds which it would have had to pay over 16,000 Sk for each in 2001 when they mature - indeed a real savings.
According to information provided by the RM-System, 1,046 bondholders became shareholders after exchanging their FNM bonds for the offered shares, which have an overall nominal value of 11.723 million Sk. But that value was disputed by market analysts and traders directly involved with the auction, who said it was questionable.

The National Property Fund (FNM) made a great deal for itself. In a two-round anonymous auction through the RM-System between July 7 and August 4, the privatization agency got rid of 172,395 more or less lousy shares from its portfolio with an average share price of 68 Sk, and earned back those bonds which it would have had to pay over 16,000 Sk for each in 2001 when they mature - indeed a real savings.

According to information provided by the RM-System, 1,046 bondholders became shareholders after exchanging their FNM bonds for the offered shares, which have an overall nominal value of 11.723 million Sk. But that value was disputed by market analysts and traders directly involved with the auction, who said it was questionable.

The first round of the auction offered shares of 23 companies, several of which were in liquidation and many others that are facing bankruptcy. According to Darina Huttová, the RM-System's spokeswoman, only five companies from the offer were "tradable."

"It is difficult to say why people would want those shares, but more or less it is because they have no idea what [else] to do," Peter Krupa, an RM-System analyst, said. "The people are desperate, because the demand for bonds at the market is totally insufficient," Huttová said. "We are unable to satisfy the offer."

By offering some of the least valuable shares from its portfolio to the FNM bondholders, the FNM practically kept the promise made in 1996.

"ZBOŘIL QUOTE COMING"

Back then, the FNM bonds were distributed to all Slovaks who had wanted to participate in the second wave of voucher privatization and get back their portion of the national property once confiscated by the communists.

Over 2 million Slovaks took part in the first wave and about 3.5 million registered for the second wave which was due to begin in December 1994. But after he won the 1994 national elections, Prime Minister Vladimír Mečiar said he had a better idea and introduced a so called "bond privatization", in which all the voucher holders got one FNM bond worth 10,000 Sk with a maturity in the year 2001 and an 8.8 percent interest, based on the National Bank of Slovakia's discount rate.

But ever since, the bond's value kept falling. For those who didn't want to wait until 2001, Mečiar's administration set the minimum selling price at 7,500 Sk. Various companies launched sales, offering a TV set or a mobile phone in exchange for two bonds, pushing the average bond value even lower.

"[The bond exchange] brought in a lot of people who never would have thought of owning a mobile phone and whose bonds were just sitting in the closet," said Andrea Boldocká, a PR manager at Globtel, a mobile phone provider.

But recently, Globtel cancelled the sale due to constantly dropping price of the bonds. Nowadays, over 30 bondholders a day dial the number of the capital market information service wanting to find out how to get rid of their FNM bond. But not much advice can be given, a service employee, Beáta Tomášková, said.

The bondholders can wait until their bonds mature, hoping to cash the money, which will be a little over 16,500 Sk per bond provided the NBS's discount rate doesn't change. However, some analysts warn the FNM will hardly be liquid enough in 2001 to be able to pay. The bondholders may get lucky and be enabled to use the bond when purchasing an apartment, but very few cities so far accept the bonds as a mean of payment.

People may offer the bond through the RM-System hoping someone will buy it. Or, they may try to sell it to an FNM-licensed mediator between the FNM and the FNM debtors - privatizers - getting between 4,000 and 5,000 Sk. But, according to Tomášiková, there are very few active mediators left.

Or, the bondholders still have a chance to become shareholders. Currently, the FNM shares auction is taking the third round.

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