EBRD Allots $2.2 Billion for Romanian Banking M&As, Other Deals

  • Bank may assist Bucharest Airports, Constanta Port on IPO
  • Posta Romana sale may happen in 2-3 years, EBRD's Patrone said

The European Bank for Reconstruction and Development seeks to fund mergers and acquisitions in the Romanian banking industry and finance state-owned businesses on track for initial public offerings, an official at the lender said.

The London-based bank plans to work with several companies in Romania to provide either equity participation, convertible loans or senior credit and help them prepare for share sales, according to country Director Matteo Patrone. The lender plans to invest as much as 2 billion euro ($2.2 billion) in the largest Balkan country over the next four years, with funding ranging from 1 million euro to more than 150 million euro in individual cases, he said.

“We are absolutely interested in investing and engaging in terms of support to these restructuring activities,” Patrone said in an interview in Bucharest on Tuesday. “We’re planning to work with a number of companies that are slated for privatization at some point,” he said, naming Bucharest Airports, Constanta Port, Posta Romana SA and Hidroelectrica SA, once it emerges from insolvency, as potential projects.

Romania failed to deliver on pledges to sell at least three companies on the stock exchange this year, which was part of an agreement with the International Monetary Fund and the European Union, because of legal issues or accumulating losses. That agreement expired last month and the government plans to ask for a new deal by the end of this year.

Banking Industry

The development bank is also interested in participating in potential mergers and acquisitions in the banking industry, according to Patrone, who said he “hopes” to see at least one deal closed by the end of the year. He gave no further details about the EBRD’s potential involvement.

The country could sell shares in the airports operator and the port “tomorrow” if it wanted to, Patrone said. By contrast, it may take two or three years to get the post company in shape for privatization after it failed to attract a binding bid from Bpost SA last month, he said.

The EBRD, which invested about 600 million euros in Romania last year, may team up with the IMF in efforts to help the companies become more efficient before they’re offered for sale.

“We would never consider providing finance without a set of conditions for the company to be restructured because ultimately that’s the purpose of our intervention,” Patrone said. “We would be very happy if a new transaction with the IMF happens also because our understanding is that it’s indeed linked to structural reforms.”

Regulatory Pressure

Facing pressure from regulators to clean up their balance sheets, Romanian banks have put billion of euros worth of bad loans up for sale in the past two years, luring investors interested in the debt recovery market, such as Deutsche Bank AG and Blackstone Group LP.

The EBRD also wants to fund transactions that may help cut Romania’s non-performing loans ratio to a more sustainable level of between 6 percent to 8 percent from the current 12 percent, Patrone said.

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