Bulgaria steps in to take minority stake in Fibank (updated)

First Investment Bank AD

12/06/2020 11:19

(Adds details, official quote)
    SOFIA, June 12 (Reuters) - State-owned Bulgarian Development
Bank will take a stake of up to 19% in First Investment Bank
(Fibank)  5F4.BB , which is raising money to cover a capital
shortfall found by the European Central bank last year, the
finance minister said on Friday.
    Fibank's capital increase is the last box Bulgaria has to
tick before getting the nod to enter the European Union banking
union and a two-year obligatory precursor to the euro zone.
Sofia hopes to join both in July.
    The Balkan country's fifth largest bank is seeking to raise
200 million levs ($115.94 million) in a 26.7% capital increase
by issuing 40 million new shares. 
    "The participation of Bulgarian Development Bank in the
capital increase of First Investment Bank should be up to 70% of
the subscribed and paid shares," Finance Minister Vladislav
Goranov told a government meeting.
    "The capitalisation of a systematically important bank is
good news that further boosts the stability of the financial
system. And if we add that this is the only obstacle to joining
the ERM-2 mechanism, I think this is the right move," he said.  
 
    The subscription of the new shares runs until June 25, but
all the rights were bought in an auction on the Sofia bourse on
Wednesday.  urn:newsml:reuters.com:*:nL8N2DN5M4
    The government has said the coronavirus crisis had hit
investors' appetite and the state had to step in to ensure that
Bulgaria would meet all requirements to enter the two-year
obligatory precursor to the euro, the ERM-2 mechanism.
    Traders said the state had to intervene to back the capital
increase not least because the new shares were priced at 5 levs
per share - a big premium to the current market price.
    After the announcement, the shares of Fibank rose by 9.7% to
2.94 levs per share. 
    Goranov said state participation did not constitute state
aid because 30% of the capital increase is expected to be
subscribed to by private investors. 
    Prime Minister Boyko Borissov said that Bulgarian
Development Bank would buy back its stake in Fibank with
interest, ensuring there would be no loss to public funds. He
did not provide details.
    Stakes in Fibank owned by Bulgarian businessmen Tseko Minev
and Ivailo Mutafchiev, who each own 42.5%, will be diluted after
the issue, but they will remain majority shareholders.
    The remaining 15% is floated on the Sofia bourse.
    ($1 = 1.7251 leva)

 (Reporting by Tsvetelia Tsolova. Editing by Jane Merriman)
 ((tsvetelia.tsolova@thomsonreuters.com; +359-2-93-99-731;))