Tuesday, October 15, 2013

AFP: Romania freight rail privatisation fails

The privatisation of Romania's freight rail company, a key commitment to the IMF, failed Monday, with the government and the would-be buyer blaming each other for the breakdown.

Romanian transporter Grupul Feroviar Roman (GFR), which in June was declared winner of the tender, had until Monday evening to pay 202 million euros ($274 million) for a 51-percent stake in CFR Marfa.

"The deadline has expired and GFR has not come up with the money," Transport Minister Ramona Manescu told a press conference.

She added a new tender would be launched soon.

GFR in turn said it did have the money and blamed the government for not observing its part of the deal.

Chief executive Gruia Stoica said the transport ministry failed to get approval for a shareholder change from CFR Marfa's local and foreign lenders.

"We were summoned to the transport ministry and told that the privatisation bid cannot continue as the conditions were not met," Stoica said.

GFR was the sole bidder for CFR Marfa after US firm OmniTRAX and an Austrian-Romanian consortium pulled out.

During negotiations with the ministry, GFR also promised to invest an additional 200 million euros in modernising the rail company.

But analysts voiced doubts over its capacity to put together such large amounts of money.

The sale of the heavily indebted, loss-making carrier was one of the conditions set by the International Monetary Fund under a precautionary 3.5-billion-euro ($4.7-billion) credit line that expired in June.

Romania meanwhile concluded a new, $2.7-billion deal with the IMF.

In September the IMF insisted the country needed reforms in the transportation and energy sectors to improve the business climate.

CFR Marfa employs 9,000 people. In 2011 it posted a net loss of 93 million lei (20.6 million euros) on sales of 1.1 billion lei.

A first attempt to privatise the company failed this spring when the transport ministry said the three bidders had not met the conditions for the sale.

A new procedure was launched a few weeks later, but two of the bidders contested it, leaving GFR the only contestant.

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