Bidders Backpedal from Bulgarian Railways Privatization

Business | March 11, 2013, Monday // 13:00
Bidders Backpedal from Bulgarian Railways Privatization: Bidders Backpedal from Bulgarian Railways Privatization Outgoing Bulgarian Transport Minister Ivaylo Moskovski. Photo by BGNES

Companies are withdrawing their bids for privatization of the troubled Bulgarian State Railways company, BDZ Holding, according to outgoing Transport Minister, Ivaylo Moskovski.

Moskovski sees the large-scale protests against the privatization, held over the weekend in Bulgaria, as the most likely reason for this retreat.

The outgoing Minister explained the remaining bidders are also very alarmed by the rallies, but added he had no information about the concrete investors backpedaling on the deal.

He further notes all of the above is quite troubling since another failed privatization procedure would threaten the salvaging of the company.

"The World Bank is giving money to the State for BDZ on condition we successfully privatize its Freight Services. This is the only way to save the railways. We must ask the demonstrators if they are willing to foot the bill to repay creditors. Passenger Services must remain State-owned as a stable company, providing transport to Bulgarians. To people protesting now against these processes, I may also say they are late. They should have done it at the time BDZ was taking these loans, which was during the term of the previous, Socialist-led cabinet of the Three Way Coalition," said the Minister.

At the beginning of February, the Sofia City Court ordered a freeze of 100% of the assets of the cargo unit of Bulgarian State Railways company, BDZ Holding.

The freeze happened on the request of the Dublin-based German-Irish bank Depfa Bank, which owns bonds from the first bond loan for BDZ. BDZ owes to Depfa about BGN 6.3 M.

The news came on the heels of reports that five banks have filed a claim with the London Arbitration Court to declare BDZ Holding, bankrupt.

Experts comment that both – the freeze and the claim – would hurdle the privatization of the cargo unit. The freeze actually and effectively stops the procedure. Those who deal with frozen assets face prosecution under the law.

In mid-November 2012, Bulgaria's Privatization Agency launched a second privatization procedure for BDZ's Freight Services, after the first one fell through.

The second attempt to sell the cargo unit of BDZ only included strategic and financial investors.

The privatization of BDZ's profit making unit, Freight Services, is to secure money to cover huge debts of the company and help revive its other unit, Passenger Services.

However, experts from the railway sector have already said the State should not count on receiving much as the revenues of the cargo unit dropped by 30% in 2012, while the debt keeps climbing up.

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Tags: Transport Minister, Ivaylo Moskovski, protests, rallies, privatization, Depfa bank, freeze, Holding, assets, cargo unit, bond, Bulgarian State Railways, BDZ, Freight Services, Passenger Services
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