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FNM offers rubbish for bonds

At last, the National Property Fund (FNM) rewarded all its bondholders who stubbornly want to privatize. On July 7, it offered the 3.5 million Slovak citizens shares of 23 companies from its portfolio, several of which face bankruptcy; some are already in liquidation.
The most valuable company in the offer is Inprog a.s., Poprad, whose share is worth 250 Sk. This company with eight employees designs train cars and steel containers. Last year, Inprog made 327 million Sk ($10.9 million) pretax profit. According to its director, Jaroslav Cicák, its property consists of a fax, a copy machine and furniture from 1981.
Another company in the offer, Kovozávod Lipany, employs two accountants and a couple of doormen. For two years, Kovozávod's heating has been turned off. The company is in liquidation.

At last, the National Property Fund (FNM) rewarded all its bondholders who stubbornly want to privatize. On July 7, it offered the 3.5 million Slovak citizens shares of 23 companies from its portfolio, several of which face bankruptcy; some are already in liquidation.

The most valuable company in the offer is Inprog a.s., Poprad, whose share is worth 250 Sk. This company with eight employees designs train cars and steel containers. Last year, Inprog made 327 million Sk ($10.9 million) pretax profit. According to its director, Jaroslav Cicák, its property consists of a fax, a copy machine and furniture from 1981.

Another company in the offer, Kovozávod Lipany, employs two accountants and a couple of doormen. For two years, Kovozávod's heating has been turned off. The company is in liquidation.

"Politely speaking, it is indecent that the FNM is offering companies in bankruptcy," said Ľudovít Farkašovský, the former director of Kovozávod. "Being one of our shareholders, the FNM regularly received information from us. They must have known it all."

The FNM bonds were distributed two years ago, replacing vouchers designed for the second wave of coupon privatization after Premier Vladimír Mečiar's government canceled the method as soon as it resumed power in December 1994, saying it was not a fair way to transfer national property to citizens' hands. Mečiar came up with the idea of FNM bonds, worth 10,000 Sk and supposed to mature in 2001.

However, the opposition and economic analysts warned that the FNM will not be liquid enough at that point to pay the expected amount of money.

The bondholders may try to sell their bonds through the RM-System, after the government administratively set the highest selling price at 7,500 Sk. But demand for the bonds at the market is practically zero anyway.

Some cities promised to accept the bonds as a means of payment for apartment purchases. Several insurance companies take them too. They can also be exchanged for goods, with TV sets, microwaves or mobile phones being mostly offered for two bonds. However, the price of the offered product is usually way below 15,000 Sk.

While introducing the bond policy, the cabinet promised the FNM will later offer shares for those citizens whose interest in the capital market would be persistent.

The actual offer, however, was yet another blow in the face of the bondholders, who initially wanted to participate in the second wave of the coupon privatization offering property worth some 60 billion Sk.

The FNM officials don't even pretend they care whether people have a chance to get a decent pay-off for the years of communism, which had been the original idea behind the coupon privatization.

"What do you mean by 'ethical'? Were we supposed to offer shares of three banks and Slovnaft?" Rastislav Zbořil, the director of the FNM department that administered the offer, asked during an interview with reporters of the economic weekly Trend.

When asked to describe the philosophy behind the selection of the companies, Zbořil said: "These were shares remaining on the FNM portfolio. The philosophy was set for an anonymous auction, so we chose the shares in a certain manner, which... Well, we simply chose them! What philosophy?! These were simply minority shares in the FNM's possession."

Zbořil himself would "personally not buy any of the shares." He slipped his tongue and admitted the FNM counted on possible buyers' ignorance. "If a citizen knows that a certain company is in liquidation, he or she would not be interested in buying the shares," he said.

For the two weeks following the offer, the RM-System is collecting orders from the eager-to-buy bondholders. An RM-System representative, who preferred to stay anonymous, said in a phone interview that demand for the FNM offer is "very low."

"It is all just a farce, the FNM made the offer only because it had to. There is not much one could add to this," the source added.

According to Jozef Hajko, the deputy editor of Trend, the latest FNM's activity has perfectly exposed the Mečiar government's attitude to citizens.

"The arrogance of the ruling coalition towards its own citizens is limitless," Hajko wrote in the editorial. "The state decided to offer the FNM bondholders residual shares of 23 companies, because none of the government's cronies had been interested."

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