EUROPE APPROVED THE DEBT TO EQUITY CONVERSION The European Commission helps the privatization of "Oltchim" move along

After almost four years of investigations, the European Commission has approved the conversion of the debt of "Oltchim" towards the AVAS (ed. note: Authority for State Assets Recovery).

Antoine Colombani, spokesperson to the European Commission said: "On Wednesday, March 7th, 2012, the Commission approved the conversion of the public debt of Oltchim, amounting to a total of 1,049 million lei", and he went on to say: "This debt to equity conversion is a measure proposed by the Romanian authorities to facilitate the full privatization of the company in 2012".

Excluding interest, "Oltchim" owes the AVAS 125 million Euros.

In 2002, the AVAS took over a receivable of 508.6 million lei from the Ministry of Finance, originating from the execution of the guarantees issued by the state for the foreign loans contracted by the company.

In July 2009, Romania notified the European Commission about two measures which favored "Oltchim". The first measure involves a conversion of the public debt of approximately 135 million Euros into stock. The second was a government guarantee which covered 80% of a commercial loan of 424 million Euros, which would be used for the modernization of the company and for subsequent investments.

The decision of the European Commission allows all the shareholders of the chemical plant to participate in the share capital increase of "Oltchim".

Normally, after the publication of the decision, since it is the majority shareholder of "Oltchim", the Ministry of the Economy, will summon a general shareholder meeting, which will discuss the course of action to be followed after the decision of the authorities in Brussels.

After the increase of the share capital, the privatization of "Oltchim" can begin.

Through the Ministry of the Economy, the government owns 54.8% of the plant.

According to the agreement signed with IMF, "Oltchim" is one of the eight companies which the government intends to privatize this year. The officials of the Ministry of the Economy said that the announcement concerning the sale of the majority stake in OLT will be made on March 15th.

Other shareholders of the plant include "PCC SE", which holds 17.47%, and investment fund "Carlson Ventures", registered in the UK, which owns 14.02% of the shares, through Nachbar Services.

Russian giant "Gazprom", through "TISE", expressed its interest in buying the majority stake of OLT, in a letter submitted to the Ministry of the Economy in November 2011.

Azeri company "SOCAR" also expressed its interest in acquiring "Oltchim".

"Oltchim" currently has 1.55 billion lei in short term debt and 986 million lei in long term debt.

Part of that debt is owed to "Electrica", which terminated its contract with "Oltchim" in the beginning of this year, as the provision of electricity was taken over by "Electrica Furnizare".

Sources from "Electrica" told us that the total debt of "Oltchim" amounts to 660 million lei (150 million Euros) and so far, the plant of did not pay the overdue amounts, meaning that it failed to honor the payment rescheduling. Also, in order to recoup their loss, the representatives of "Electrica" have asked the Ministry of the Economy to assign the receivable in four equal tranches.

"Oltchim" reported a loss of 270 million lei in 2011, up 20.9% over 2010, even though its turnover rose 17.1%, to 1.53 billion lei.

Revenues increased 15.4%, to 1.64 billion lei, and expenses increased 16.1%, to 1.91 billion lei.

The increase in sales is the only positive factor, as they have increased over the past few quarters to 1.53 billion lei at the end of 2011 (approximately 3.5 billion Euros).

The company has a share capital of 34.2 million lei, divided into 343.2 million shares, with a face value of 0.1 lei.

• In October, BCR and Banca Transilvania were interested in a debt to equity conversion for "Oltchim"

On the possibility of BCR and Banca Transilvania (the banks which "Oltchim" has debt toward) having sent requests to the European Commission concerning the conversion of the debts of Oltchim into stock, Antoine Colombani, spokesperson of the European Commission said: "We can not comment on that matter".

The Romanian Commercial Bank (BCR) and Banca Transilvania (BT) have expressed their interest, in October last year, to have the debt owed by Oltchim converted into stock.

The matter was discussed during a meeting with Ion Ariton, the Minister of the Economy at the time, and the presidents of the two banks, Dominic Bruynseels and Horia Ciorcilă.

BCR and BT have expressed their willingness to support the company, including by granting additional loans, until the privatization was completed.

In October 2010, "Oltchim" announced in a communiqué, that the Romanian Commercial Bank would become a shareholder of the company through the conversion of part of the loan of 72.4 million Euros which the bank granted the company in November 2009. The announcement was later taken back, and "Oltchim" said that it "regretted any problems and confusion which may have originated from the aforementioned press release as well as its interpretations".

According to the annual statement, at the end of 2010 Oltchim had short term debt of 72.5 million Euros towards BCR and two months of 100 million lei in financing and 12.25 million dollars in debt towards Banca Transilvania. Oltchim also has a long term loan of 8.5 million Euros, taken from Banca Transilvania, with a seven years maturity.