Bulgaria Seeks Corporate Bank Rescue With Shareholders

Bulgaria will let the shareholders of Corporate Commercial Bank AD seek ways to rescue it from bankruptcy after parliament shot down a cabinet proposal to recapitalize the bank.

Bulgarian Finance Minister Petar Chobanov discussed “finding a working solution” for Corp Bank by phone with Abdulsalam Al Murshidi, executive director of the State General Reserve Fund of Oman, the Finance Ministry in Sofia said in an e-mailed statement today. The fund holds a 30.35 percent stake in Corp Bank through its Luxembourg-registered Bulgarian Acquisition Co.

“State institutions will intervene” in rescuing the Balkan state’s fourth-largest lender “if the shareholders don’t succeed,” the ministry said. “Finding a private solution to the problem that doesn’t engage public resources is the most desired outcome.”

Prime Minister Plamen Oresharski’s minority cabinet is trying to stabilize the banking system before resigning at the end of this month. Bulgaria will hold early elections on Oct. 5, three years ahead of schedule, after opposition politicians won European Parliament elections and accused the ruling Socialists of bringing the country to the brink of ruin.

Lawmakers in the Budget and Finance Committee didn’t approve a government plan to revise the state spending plan by raising the deficit to 2.7 percent of economic output, which would have let the next government bail out the bank with new debt sales of as much as 3.4 billion lev ($2.35 billion).

Extra Spending

The extra spending also envisaged covering a state health-fund deficit and boosting reserves. The 240-seat assembly hasn’t convened for two days for lack of a quorum. President Rosen Plevneliev will dissolve the chamber on Aug. 6.

Bulgaria is grappling with its worst bank crisis since 1997, when one third of the country’s lenders were closed. The central bank placed Corp Bank under supervision for three months on June 20 after a big depositor withdrew funds.

The European Commission gave the government approval to extend a 3.3 billion-lev credit line to lenders after police arrested men they said triggered a run on the third-largest lender, First Investment Bank AD, a week later. The run on First Investment, which paid 800 million lev in deposits to clients in one day, was contained, Oresharski said on July 4.

Audit, Shareholders

Lawmakers failed to agree on a draft law proposed by the central bank and the government to insure deposits in Corp Bank for more than the legal limit of 100,000 euros ($135,000). The cabinet was seeking ways to repay the deposits of Bulgarian companies that employ about 75,000 people. It was also considering repayment of Corp Bank’s $150 million bond, which matures on Aug. 8, Chobanov said on July 16.

An audit at Corp Bank found missing files for 3.5 billion lev in loans, out of its total credit portfolio of 5.4 billion lev, which are linked to its majority shareholder Tsvetan Vassilev, the central bank said on July 11. It was unclear how many of the 3.5 billion loans were nonperforming, the bank said.

Vassilev holds 50.66 percent of the bank through his brokerage, Bromak EOOD. VTB Group, Russia’s second-biggest lender, holds a 9.9 percent stake.

The Sofix index rose 1.4 percent to 538 at 2:18 p.m. in Sofia. The yield on Eurobonds maturing in July 2017 rose 20 basis points, or 0.2 percentage point, to 1.718 percent, according to data compiled by Bloomberg.

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