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BUSINESS FOCUS - BANKING - SLOVENSKÁ KONSOLIDAČNÁ BAILOUT AGENCY TENDERS FOR ANOTHER PACKAGE OF CLAIMS

State expects money for bad loans

SLOVAK bailout agency Slovenská konsolidačná (SK) is aiming to sell another package of bad loans from restructured Slovak banks, as it gradually gets rid of claims that it took over in the pre-privatisation process of banks in 2000 - 2001. The tender will also be opened for foreign investors.
The state is offering investors claims to the face value of Sk14 billion (€340 million).
"The aim of SK is to create, through an international tender, an environment as competitive as possible and to generate a maximum price in the sale of claims in terms of their creditworthiness," Zoltán Gyurász, the chairman of the board of directors told the press.

SLOVAK bailout agency Slovenská konsolidačná (SK) is aiming to sell another package of bad loans from restructured Slovak banks, as it gradually gets rid of claims that it took over in the pre-privatisation process of banks in 2000 - 2001. The tender will also be opened for foreign investors.

The state is offering investors claims to the face value of Sk14 billion (€340 million).

"The aim of SK is to create, through an international tender, an environment as competitive as possible and to generate a maximum price in the sale of claims in terms of their creditworthiness," Zoltán Gyurász, the chairman of the board of directors told the press.

Package "VVK 2004" offered in this latest tender includes 1,434 bad loans of 805 debtors. From the overall package 45 percent are receivables of debtors in bankruptcy proceedings, 41 percent are written-off receivables, and seven percent are debtors in distraint proceedings.

All investors who are interested in acquiring the package must register with SK by September 20 and pay collateral of Sk20 million (€480,000). A potential investor must not be interconnected with any debtor of the package.

After registration an investor will receive documentation on claims and debtors in electronic form. He will also be permitted to enter the data room.

SK expects bids up to November 16 and buyers can submit their bids only as a whole package of claims.

SK would like to announce results of the tender no later than December 17.

"The transparency of the tender should be guaranteed by the way how the tender commission will be set on the day of submitting the bids, where one of its members will be nominated by SK," added Gyurász.

"The single and most decisive criteria [for choosing a winner] after fulfilling the formal regulations will be the offered price," said Patrik Golský, the director of SK communication department. SK refused to reveal the expected return on this sale.

SK believes that the sale will be successful. So far, they have registered nine potential investors, of whom the majority are foreigners.

The SK's portfolio concerns the restructuring appertaining to three major Slovak banks: Slovenská sporiteľňa, Všeobecná úverová banka, and Investičná a rozvojová banka (today's OTP Bank).

Under the government of Vladimír Mečiar between 1994 and 1998, some state banks provided loans to companies on the basis of what many industry insiders and independent analysts dubbed political motivation and/or personal friendships, rather than company viability.

Consequently banks ended up with huge classified and non-performing loans, and the Slovak economy, bereft of healthy banks, came to the edge of collapse.

The transformation process was started between 1999 and 2000. The government's plan to clean up the banks culminated in transferring bad credit to the special financial bailout "hospitals" SK and Konsolidačná banka in 2000. Later, Konsolidačná banka merged into SK.

SK took over claims with a total nominal value of approximately Sk140 billion (€3.38 billion) into its portfolio, which is currently represented by claims worth Sk65 billion. SK is a joint stock company, 100 percent owned by the Finance Ministry.

Returns from the SK sale of its bad debts portfolio is supposed to decrease fiscal costs on restructuring. In light of the quality of the agency portfolio, the whole SK project suggested returns of up to 10 percent of the face value of debts.

SK recently sold the biggest package of claims ever to the financial company Majetkovy Holding. The package had a nominal value of Sk42 billion (€1.02 billion).

The price was set at Sk863 million (€21.06 million), which is 2.85 percent of the principal of Sk30 billion (€732.09 million).

Along with Majetkovy holding, four other financial companies, namely Wittily Investments Limited, AB-Credit, UT Trading Limited, and Vinaco Holding Limited presented their bids, ranging from 2.22 to 2.85 percent of the principal price of the claims, which is the nominal price without interest gains.

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