The state, in the person of prime minister Boyko Borisov and economy minister Emil Karanikolov, may have declared the end of privatization but Bulgaria’s largest municipality is about to sell its most significant asset that is subject to privatization. That concerns the sale of Sofia municipality’s 67.64-percent stake in Municipal Bank.
The privatization of Municipal Bank will follow the model used by GERB and Borisov’s first government to sell Bulgartabac Holding. And not only it.
Several essential similarities:
Only one candidate
Unclear candidate’s owner
Withdrawal of all strategic investors
The story
At the end of last week the Sofia Municipal Privatization and Investment Agency (SMPIA) announced that only one candidate, Lichtenstein-registered Novito Opportunities, had submitted an offer for the privatization of Municipal Bank. So even though the privatization procedure envisages an auction, there will not be an auction because the buyer will most probably win with a bid a little higher than the 46 million leva minimum price required.
The candidate is 100% owned by another Lichtenstein-registered company, CAIAC Fund Management AG. It is a management company that provides services to private investors. That means that Novito Opportunities may be just a letterbox entity organized by CAIAC Fund Management AG on behalf of a client.
Let’s say it another way. The bank that services the largest municipality in Bulgaria and all its trade companies will go into entirely unknown hands.
Candidates for the bank were required to be strategic or financial investors whose end owner was not registered in an offshore zone and who did not have outstanding public debts. Since Lichtenstein is not on the EU list of offshore zones, it is an excellent harbour for such investments.
The Capital reminds that in early 2016 Lichtenstein dropped out of the finance ministry’s list of countries/territories with preferential taxation treatment according to the Corporate Income Taxation Act. Until then it was on the list.
A few days before the SMPIA announced there was only one eligible candidate, the agency’s CEO Vladimir Danailov said, cited by Mediapool, that three companies had shown interests in the municipal stake in the bank in the course of the procedure: two foreign and one Bulgarian. Two of them however decided not to buy information memorandums, so they did not have the right to submit offers.
The background
All that recalls the privatization procedure of Bulagrtabac Holding.
There too all candidates were delicately excluded with the exception of one candidate, BT Invest. The buyer was generously presented as Russia’s VTB bank. Only three years after the privatization however the ownership sunk into several Lichtenstein-registered companies, which in turn were owned by offshore companies registered in the British Virgin Islands.
Leaked email correspondence between Alexander Angelov, the lawyer of Movement for Rights and Freedoms (MRF) MP Delyan Peevski, and KTB majority owner Tsvetan Vasilev, who also had a financial engagement to make a secondary buy-back of Bulgartabac, reveals grave political corruption and data about money laundering, large-scale tax crimes etc.
Bulgaria’s prosecution, however, firmly refuses to investigate Bulgartabac’s acquisition by companies with unknown ownership.
By the way, the one-horse race is a common practice in GERB’s privatization: the sale of Promishleno Stroitelstvo Holding, Technoexportstroy, the assets of IPK Rodina etc. All deals closed during Boyko Borisov’s fist government finished with one candidate paying an insignificant premium above the minimum price. All those assets in the end turned out to be under the control of MRF MP Delyan Peevski.
The procedure behind all those deals gives good reason to suspect grave corruption practices. So far however the Bulgarian prosecution has not examined any of the deals of GERB and Borisov.
