Slovenia Asset-Sale Plan Fails to Ease Debt Squeeze Concern
Slovenia’s plan to sell shares in state-owned companies failed to ease investor concern that the country will become the next euro-area nation to need a bailout.
Slovenia’s default risk rose to a six-month high and bond yields hovered near records as the country prepares to tap markets this week. Prime Minister Alenka Bratusek’s April 12 announcement of plans to sell stakes in companies, including a bank, looks like an effort to stall rather than to obtain financing, according to Milan Smiljanic, head of trading at Perspektiva d.d.
“There is skepticism that they are only buying time and will try to fix debt problems, avoiding privatization,” Smiljanic said by e-mail from Ljubljana. “There are no bank bidders at the moment.”
Slovenia, the European Union’s fourth-smallest economy, is trying to avoid becoming the sixth euro-area state to seek a bailout after international lenders agreed to help Cyprus. The government will sell 500 million euros ($654 million) in 18- month Treasury bills at an auction in two days as it tries to shore up confidence that it can recapitalize its ailing banks without seeking outside assistance.
The cost of protecting Slovenian debt against non-payment using credit-default swaps rose to a six-month high today, advancing six basis points to 375, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
The yield on Slovenia’s dollar-denominated benchmark bond maturing in 2022 is hovering close to record levels after the Finance Ministry missed its target in last week’s auction of Treasury bills by almost half as borrowing costs rose. It gained five basis points to 6.22 percent as of 3:42 p.m. in Ljubljana, compared with a March 27 high of 6.38 percent.
The government sold 56 million euros of six-month and one- year Treasury bills on April 9, falling short of its target and reigniting concern that it will need international assistance. It’s seeking to buy back early as much as 855 million euros of 18-month notes due June 6, the Finance Ministry said in a statement on its website last week.
Bratusek, whose government came to power last month, said April 12 that she would submit an asset-sales plan to lawmakers in two weeks.
“We will start the privatization process of one or two bigger companies immediately,” Bratusek said. “My wish is that we privatize one of the banks as well.”
Slovenia holds stakes in Nova Ljubljanska Banka d.d. and Kreditna Banka Maribor d.d., the two biggest banks. Insurer Zavarovalnica Triglav (ZVTG) d.d. -- itself a possible privatization target -- is the single largest shareholder in No. 3 lender Abanka Vipa d.d.
State phone operator Telekom Slovenije d.d. may have the most political support for a sale, according to Perspektiva’s Smiljanic. The situation is “more unclear” regarding Zavarovalnica Triglav and Petrol Group d.d., Slovenia’s biggest energy company, he said.
Bratusek, Slovenia’s first female prime minster, is viewed negatively by 42 percent of the country, according to an April 8-11 survey of 610 people conducted by the Delo Stik agency and published in Delo newspaper today. No margin of error was given.
Telekom Slovenije canceled the sale of a 49 percent stake in March 2008 after bidders failed to improve offers during several sale extensions. The Ljubljana-based company had a market value of 1.97 billion euros at the time.
It stood at 550 million euros today after the shares fell 4.3 percent to 84.2 euros. The stock has fallen 12 percent this year, according to data compiled by Bloomberg.
Even if the government manages to draft a plan in the time frame it set, credible implementation won’t be quick, according to James Howat, an analyst at Capital Economics Ltd. in London.
“Slovenia will also need to move toward politically unpopular privatizations given that poorly managed state-owned banks are at the heart of the current crisis,” Howat said in a note to clients today. “The government has pledged to retain blocking stakes in any privatized bank, which may discourage potential buyers.”