Bulgaria to Sell Bourse, Railways Freight Company in 2015

18.2.2015 г. 10:33

(Bloomberg) -- Bulgaria plans to resume sales of majority stakes in the Bulgarian Stock Exchange and the State Railways Freight Services Unit to narrow its budget deficit this year after a bank run depleted its coffers in 2013.

The government plans to sell 50.05 percent of the bourse and 42.7 percent in the Central Depository, which is the securities settlement company, Privatization Agency Executive Director Emil Karanikolov said in an interview in the capital Sofia on Feb. 13. The agency also plans to sell stakes in the Domestic Diplomatic Properties Agency, the Plovdiv International Fair and Niti anti-tank mine producer.

“There is a political decision to sell the bourse,” Karanikolov said. “It will be better for the capital market if a big foreign investor manages the stock exchange. The deal will probably be completed by the middle of this year.”

Prime Minister Boyko Borissov’s four-month-old cabinet seeks to narrow this year’s budget gap to 3 percent of economic output, after Corporate Commercial Bank’s failure last year prompted early elections and its state support fueled the deficit to 3.7 percent. The European Union’s poorest state in terms of per-capita output is struggling to boost growth as it recovers from economic crises and five government changes in two years.

Borissov, whose first government was toppled by anti-austerity protests in 2013, plans to sell 8 billion euros ($9 billion) in debt in the next three years to fund public construction projects and repay debts. More than 80 percent of Bulgaria’s economy is privately owned after the country sold state assets following the collapse of communism in 1990.

Deutsche Boerse

The government plans 30 asset sales this year expecting revenue of at least 150 million lev ($87.4 million), Karanikolov said. The estimate doesn’t include future proceeds from the freight unit as they will be transferred to the railway company, he said.

Previous efforts to sell the bourse attracted interest from Deutsche Boerse AG, Wiener Boerse AG and Hellenic Exchanges SA, Karanikolov said. The stock exchange has traded on the Deutsche Boerse’s Xetra platform since 2008. The agency began a new sale procedure in 2014, which it plans to cancel after its tender for a company to do due diligence evaluation of the bourse was appealed in court.

“We’ll start a new tender for the due diligence, hopefully next week,” Karanikolov said.

Renewed Efforts

Grup Feroviar Roman SA, Donau-Finanz GesmbH & Co. showed interest in the Bulgarian State Railways’ Freight Services unit at the end of last year, Karanikolov said. The state-owned railway company seeks to sell its cargo unit to reduce its debts to banks worth 360 million lev, it chief executive officer Vladimir Vladimirov said on Jan. 26. Two previous sale efforts failed due to lack of interest and unfavorable bids.

“The Freight Services Unit assets have fallen by 30 million lev to 69 million lev since 2013,” Karanikolov said.

The government’s efforts to rekindle stalled state asset sales will boost investment, Georgi Ganev, program director at the Center for Liberal Strategies in Sofia, said by phone on Monday.

“There’s no other option but to sell the cargo unit,” Ganev said. “The sale will enable the passenger services unit, which has a public function, to win the EU’s permission to use state aid, which is now banned while the cargo unit is part of the railway holding.”

Asian Interest

Asia-based investment funds may be interested in the sale of the government’s 100 percent stake in the Domestic Diplomatic Properties Agency, which manages assets of the Foreign Ministry, Karanikolov said. Its sale will start in about three months and it’s estimated at 77 million lev as minimum price, he said.

The government also expects foreign investors for the 49.63 percent state stake in the facilities that host the international fair in Plovdiv.

Revenue from asset sales and investment in the companies after their sale amounted to 173.4 million lev in 2013, the Privatization Agency said.

Bulgaria’s economic growth is forecast to decline to 0.8 percent in 2015 from 1.4 percent in 2014, the European Commission said on Feb. 5.