Bulgaria Former Tsar Son "Lied" about Foreign Debt Swap

Kiril Saxe-Coburg, son of Bulgaria's former tsar and a prominent financier, has been called a liar after denying allegations that he tried to push through a controversial restructuring of Bulgaria's foreign debt.

"I am amazed by the ease with which Mr Saxe-Coburg is telling a bunch of lies," former right-wing Finance Minister Muravej Radev, according to whom Kiril Saxe-Coburg offered the deal at a confidential meeting at the end of 2000, told 24 Hours daily.

Radev padded out his claims by saying that five experts from the ministry, including former finance minister Plamen Oresharski, at the time a deputy at the department, were present at the meeting and can confirm his statement.

“An analysis of the proposed deal, which proved beyond doubt that it is unprofitable for Bulgaria, is kept in the archives of the finance ministry,” Radev said.

The debt restructuring was initiated in 2001 by the centrist government of former Tsar Simeon Saxe-Coburg and is believed to have incurred losses to the state amounting to about two billion dollars.

Members of parliament from the ruling GERB party and its right-wing partners have recently demanded a probe into the debt swap, saying there were vested interests involved in the deal, which are kept secret from the public.

"The owners of the Brady bonds that were swapped – the huge investment banks - pocketed the profit," Muravej Radev told the daily, referring to the former places of employment of the "yuppie lobby" in the cabinet of Simeon Saxe-Coburg.

"I think the deal was all about serving foreign interests, not the interests of Bulgaria," he added.

"I am not saying this is a crime. I am saying that interests of the Bulgarian tax-payers have been hurt," he concluded.

The Bulgarian foreign debt swap auction was launched on March 21, 2002. Bulgaria set yields, which suggested the government was reluctant to pay large premium to market prices.

The yield on the new dollar bond offering as part of the exchange was 9,1%, while the yield spread on the euro denominated part was 2,75% over the January 2012 German Government Bund, which then yielded about 5,23 %.

Brady bond owners could swap either into euro Global bonds dated 2013 or dollar Global bonds dated 2015. They also had two further options - cash subscription to euro bonds or cash payment for Brady buy-backs.

Minimum clearing prices for the 2011 Interest Arrears bond in the swap were USD 88,50 per USD 100 of bond for both the dollar and euro swap and USD 88, 25 for cash.

On March 13 the same year, the majority in Bulgarian parliament ratified the contracts with JP Morgan and Salomon Smith Barney on Bulgaria's foreign debt restructuring.

The then Finance Ministry said the exchange of part of Bulgaria's Brady bonds with new Eurobonds has resulted in net nominal reduction of Bulgaria's foreign debt of some USD 125 M.

The new eurobonds are with fixed interest rate and will be floated in two issues, one in euro, which will mature in January 2013 and another one in dollars, to be paid in January 2015.