Latvia Plans to Pay EBRD About 77 Million Euros on Parex Rescue

Latvia may pay the European Bank for Reconstruction and Development around 77 million euros ($95 million) in 2015 as part of a guarantee on the value of the investment the London-based bank made in Parex Banka AS.

The payment would end the guarantee the EBRD had on 126.6 million euros it invested in Parex, which was bailed out in 2008 and broken up into Citadele Banka and an asset management company, the Privatization Agency said on its website.

Latvia got a 7.5 billion-euro loan from a group led by the European Commission and the International Monetary Fund in 2008 after taking over Parex, the country’s second-biggest lender. The EBRD is being compensated for the fall in value of its investments in Citadele, where it has a 25 percent stake, and its 12.74 percent of asset management company Reverta, in line with the terms of the guarantee, the asset-sales agency said.

“The size of the payment may be corrected according to the final share price of Citadele Banka,” the agency said.

The payment may increase the budget deficit by 0.4 percentage point to 1.5 percent this year, the European Commission said in a Nov. 28 review of the Baltic country’s budget. Latvia has already paid a 1.26 million euro advance to the EBRD, and the London-based lender has agreed to refinance a subordinated loan of 11.2 million euros to Citadele, which reduced the size of Latvia’s payment due for 2015 to about 77 million euros, the agency said.

The EBRD has a put option on two stakes in Citadele and Reverta, Dutch Finance Minister Jeroen Dijsselbloem said in July in response to questions from lawmakers. Latvian opposition party Harmony on Nov. 26 sent questions to Prime Minister Laimdota Straujuma about the option, which gives the bank the right to sell its assets at a set price. Straujuma hasn’t yet replied to the questions.

Latvia’s total support for Parex in 2009 was 1.7 billion euros, including a capital boost, liquidity increase and state guarantees, according to the asset-sales agency.

The government this month sold its 75 percent stake in Citadele to Ripplewood Holdings LLC for 74 million euros. The EBRD will remain a shareholder in Citadele and Reverta.

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