June 10, 2020 / 5:21 PM / 2 months ago

Bulgarian state takes part in Fibank capital increase

SOFIA (Reuters) - Bulgaria has taken part in a capital increase by First Investment Bank 5F4.BB (Fibank), which is raising money to cover a capital shortfall found by European Central Bank stress tests last year.

Fibank’s capital increase is the last box Bulgaria has to tick before it can get the nod to enter the European Union’s banking union and the “waiting room” to join the euro. Sofia hopes to join both in July.

Economy minister Emil Karanikolov said on Wednesday the state had participated in the capital increase at an acceptable level, but declined to say how many shares it would buy, making clear it would not subscribe the whole issue. He said an official statement would be published on Friday.

Fibank is selling 40 million new shares to raise 200 million levs ($116.1 million) to help it to cover the capital shortfall.

Karanikolov 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.

“The state had to participate. Our main aim was for private investment to get in. Simply, the state aiming to deliver on its national strategy, had to make this buffer,” Karanikolov told private BTV television.

“If we had said from day one that the state will participate, we would not have achieved this effect,” Karanikolov said. “And the effect is for Bulgaria to fulfil everything necessary for an entry in the waiting room. This is very important.”

All 110 million rights to subscribe the new shares were sold on the Bulgarian Stock Exchange on Wednesday. The subscription for the new shares, offered at a market premium of 5 levs per share, will run until June 25 and trading is expected to start in early August.

Shares in Fibank rose 0.8% to 2.6 levs per share on Wednesday.

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.

Reporting by Tsvetelia Tsolova; Editing by Jan Harvey and Jane Merriman

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