Monday, July 25, 2011

Romania Delays Petrom Sale Plan as Euro-Debt Crisis Makes Investors Wary

Romania delayed selling a minority stake in OMV Petrom SA (SNP) as the euro-debt crisis made investors wary of bidding during a two-week offer period that ended today.

The country, which wants at least 2.07 billion lei ($701 million) from the sale of 9.8 percent of the country’s largest oil company, will set a new timetable because valid subscriptions didn’t reach at least 80 percent of the offer, the Economy Ministry said in an e-mail today. The government will choose a new time for the sale depending on market conditions, it said.

“The transaction was difficult to achieve in these challenging market conditions, which deteriorated further during the marketing period,” said John Porter, a managing director atRenaissance Capital, one of the sale managers, said in an e- mailed statement. “We continue to work with the government and we remain confident that a Petrom offer can be completed as soon as the market conditions will stabilize.”

Companies around east Europe, including Romania to Ukraine, are backing away from planned share sales as demand shrinks during Europe’s widening debt crisis. Euro-area leaders announced 159 billion euros ($229 billion) in new aid for Greece and cajoled bondholders to foot part of the bill. They also empowered their 440-billion euro rescue fund to buy debt across stressed euro nations after a market rout last week sparked concern the crisis was spreading.

“Romania is not desperate to sell the Petrom stake at any price and in any conditions,” Prime Minister Emil Boc said, according to local media before the sales results were made public.
Risky Region

Southeast Europe, including Romania, Bulgaria and Serbia, is most at risk, because of its proximity to Greece, and an escalation of the crisis would hurt more western European banks, Erik Berglof, chief economist at the European Bank for Reconstruction and Development, said on July 14.

Almost a third of Bulgaria’s banks and 17 percent of Romania’s are owned by Greek parents including Piraeus Bank SA, Alpha Bank SA and EFG Eurobank Ergasias SA. Greek lenders own 15 percent to 25 percent of the banks in the non-EU states of Macedonia, Serbia and Albania.

The cost of insuring Romania’s bonds against non-payment stood at 247 basis points yesterday, below higher-rated Italy’s 252 basis points, Spain’s 308 and Hungary’s 295 basis points, according to data from CMA. CDS prices rise as investor perceptions of the borrower’s creditworthiness deteriorate.

“Investors’ risk appetite towards an equity market they are not familiar with is limited,” according to Porter.
Minimum Price

The government set a minimum price of 0.3708 lei per share on the Petrom offering and a maximum price of 0.46 lei per share.

Petrom shares fell 1.9 percent to 0.3762 lei per share at 3:17 p.m., before they were suspended from trading on the Bucharest Stock Exchange. Shares in Austrian oil company OMV AV, which has majority control of Petrom, lost 1.75 percent by 3:52 p.m. in Vienna.

The leu fell 0.05 percent to 4.2419 per euro in Bucharest today, after gaining 0.5 percent before the sale announcement. Romania’s benchmark BET stock index rose 1.1 percent to close at 5415.43, as Romanian Property Fund SA and Banca Transilvania advanced.
‘Extremely Volatile’

“The capital markets were extremely volatile,” said Rares Nilas, the chief executive officer at BT Securities SA, part of the sale management consortium. “This fact was visible on the Romanian capital market too. Despite the interest for Petrom secondary public offering, the reminded context has made investors more prudent, has reduced their exposures on the capital market as well as the level of investment.”

EFG Securities Romania SA and Romcapital SA helped manage the sale.

Petrom is majority owned by OMV AG (OMV) of Austria. The Romanian government holds 20.6 percent. Fondul Proprietatea SA, Romania’s 4 billion-euro ($5.8 billion) property-restitution fund, owns 20.1 percent.

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at;

To contact the editor responsible for this story: James M. Gomez in Prague

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