Banc Post II

completed

On May 29, 1998, IFC approved a US$10 million convertible pre-privatization loan to Banc Post. The loan is fully disbursed and was originally intended to be converted, in whole or part, before June 30, 2000. However, owing to delays caused by post-privatization uncertainty over the shareholding structure of BP, IFC was not willing to convert last year. At the time of the privatization, GE Capital (GE) was to be the strategic technical partner, taking 35% of BP, with Banco Portugues de Investimento (BPI) taking 10%. The remainder was to remain with local shareholders, and both IFC and EBRD provided US$10 million pre-privatization loans with options to convert into equity at the average price paid by GE and BPI. Payment for the shares was to have been made in 12 installments. However, after three installments, GE decided to withdraw from the transaction, and the success of the privatization looked to be in jeopardy. Largely due to the support of IFC and the efforts of BPI, the Greek Eurobank (EFG) was brought in to replace GE. At the insistence of the Romanian authorities, GE remains with the shares that it had already paid for. With all these changes, it is now apparent that our existing loan does not match the current or future needs of BP or its shareholders. To meet EFG''s growth targets, BP needs equity or tier 2 capital, but our existing facility is a senior loan which has already started amortizing. IFC''s convertible pre-privatization loan to BP supported the bank''s privatization and facilitated the entry of a strategic technical partner. The positive effects usually associated with privatization are beginning to show also in the BP case: strengthening of management, introduction of new products, efficiency gains and greater competitive. The new investment would further strengthen BP by providing the bank with additional funding necessary to enter new businesses. As a result, Romania should see a deepening and broadening of the financial sector.