An attempt by the Bulgarian Energy Holding (BEH) to raise EUR 650 M through a tender has failed and now the state-owned will move to direct talks with interested banks, Deputy Energy Minister Nikolay Nikolov said on Thursday.

In the tender process, BEH has tried to raise funds through a loan or bond issue to enable its heavily indebted subsidiary National Electricity Company (NEK) to repay debt owed to the Bulgarian units of U.S.-based AES Corp. and ContourGlobal.

In turn, AES Galabovo and ContourGlobal Maritsa East 3 coal-fired power plants will repay debt they owe to coal mines and other suppliers and will cut the price at which they sell their electricity to NEK.

Bulgaria cancelled the tender procedure because both candidates, which submitted binding bids to arrange a bond issue and provide bridge financing ahead of it, had asked the Bulgarian government to extend state guarantees on the debt – a requirement rejected by Finance Minister Vladislav Goranov.

One of the bidders is a consortium of Citibank, HSBC, ING, Societe Generale and Unicredit. The second one is Italian investment bank IMI, part of Intesa Sanpaolo group.

Other banks that have expressed initial interest include Raiffeisen, Goldman Sachs, Morgan Stanley, Deutsche Bank and BNP Paribas, Reuters reported, citing two inside sources.

In September, BEH invited potential candidates to lend it EUR 650 M or arrange a bond issue and extend a bridge loan, to be repaid from proceeds from the bond.

The only candidate to extend a loan which had shown initial interest didn’t submit a bid by October 26 deadline. Out of the 12 candidates which had shown initial interest to arrange a bond issue only two submitted bids.