Gheorghe Piperea: "The AVAS is washing its hands on the matter of the listing of BCR"

Reporter: We have asked the AVAS about the means it has available to force the listing of BCR. The Authority has told us that "it has informed Erste of its finding that, on the grounds of the Agreement to postpone the listing of BCR, signed by the representatives of Erste and of the SIFs, the obligation towards the AVAS undertaken in art. 13.2 of the privatization contract (ed. note: to list the bank on the Bucharest Stock Exchange") is now without object. Furthermore, the officials of the AVAS have said that "it can be inferred that the AVAS can not cause the listing of BCR and bears no legal responsibility for the Agreement to postpone the listing concluded between Erste and the five SIFs". Is it right in its claims?

Gheorghe Piperea: The AVAS is washing its hands. This is not the correct thing to do. The clause which stipulates the listing concerns a third party. In the privatization contract, the state, through the AVAS, has made sure that when it will no longer be a shareholder of BCR, the listing of the bank will still take place. We are talking about a right of the AVAS to require the listing, under the terms of the contract concluded with "Erste".

If the Romanian state, through the AVAS, washes its hands and doesn"t want to get involved anymore, then it is a matter of political will and I think we should check who handles the economic policies in Romania.

Reporter: Still, in the response it sent, the AVAS cites the Agreement concluded between the SIFs and Erste in 2009...

Gheorghe Piperea: This is just an interpretation. We are talking about an agreement between Erste and the SIFs. It is not the obligation of the AVAS to request the listing of BCR, it is a right. Perhaps the AVAS is refraining from demanding the listing because it doesn"t want to upset Erste or the Austrian banking system, or maybe because the timing isn"t right for a listing ...

Reporter: Isn"t it problematic that the terms of this agreement haven"t been made public?

Gheorghe Piperea: Yes, it is. The shareholders are interested in finding out when BCR will get listed, and if it won"t, they want to know the reasons. Still, we are talking about a contract between private parties, and the fact that it is confidential isn"t bad in itself. The agreement, I would assume, refers to the reasons why the listing of the bank wasn"t appropriate in 2009, and the stages that would have to be followed after the expiration of the listing expired.

I think that, if another type exit for the SIFs is being negotiated, instead of the listing of BCR on the stock market, then we are talking about a management function of the SIFs, not something that is a function of the General Meeting of Shareholders. Perhaps all of the five SIFs will summon a General Shareholder Meeting, by following the request of shareholders who have requested the beginning of the steps needed to get BCR listed. If the proposals of the shareholders will get through, then the ability of the management of the SIFs will be significantly restricted. In my opinion, the listing of BCR on the stock exchange is not the best solution, look at what is happening to the European banks or to the Romanian stock market ... To say nothing of the fact that Erste is listed on the BSE and if BCR were listed as well, the two stocks would cannibalize each other...

Reporter: I think this argument can be refuted...

Gheorghe Piperea: There is another aspect to consider: there are certain capital adequacy requirements that the NBR will impose to the Romanian banking system starting in September, meaning that the banks will need to recapitalize. When the NBR forces you to raise your share capital, you have no wiggle room: you have to summon a meeting of the shareholders and get money. Let"s assume that BCR will need a share capital increase of about 500 million Euros. In this case, the SIFs would need to raise 150 million Euros to avoid having their stakes diluted. Do they have that kind of money? I think that some of the SIFs would have a little trouble coming up with 50 million Euros/each. To say nothing of the fact that they would have to summon a General Meeting of Shareholders etc...

Reporter: But couldn"t the SIFs block the decision to increase the share capital using the supermajority clause?

Gheorghe Piperea: Yes, but as a lawyer, I could, theoretically, come up with a lot of reasons to challenge the share capital increase, but BCR will claim that the share capital increase is not of its own will, but rather required because of the NBR. So, specialists should take this into account, including stock market experts.

There is one more thing to say: from the moment that the deadline of the agreement with Erste expires, all of the five SIFs will have the right to demand that Erste list the bank, and Erste is required to begin the steps for the listing. If it doesn"t, then we could see some lawsuits, some of which could be very complicated, such as claiming damages from Erste etc. Until then, I find it a bit contrived to speak about the listing of the bank. The General Shareholder Meetings of SIF Muntenia and Oltenia and most likely of the other SIFs are in my opinion, just like holy water: they won"t do any harm, and they won"t do any good either. If the initiation of the approaches for the listing of BCR will get through the General Shareholder Meeting, then this will eliminate any possibility of the management negotiating another exit, other than the listing.

Reporter: You represent SIF "Moldova" in a lawsuit in which you are demanding the suspension and the annulment of increase of the share capital of BCR, which was decided in April, this year ...

Gheorghe Piperea: That is true. This week, on August 25th, we have a hearing for getting the presidential ordinance in order to suspend the decision of BCR to perform a share capital increase instead of paying out dividends to shareholders.

Reporter: What"s going to happen with the share capital increase, if you win? Has it already been concluded?

Gheorghe Piperea: I don"t know if all the necessary steps have been made to incorporate the dividends, but even if they have been, the annulment means a return to the previous situation. If we are going to obtain the annulment of the decisions of the General Shareholder Meeting, then a new General Shareholder Meeting will be needed.

Reporter: What is the current stage of the lawsuit in which you are representing SIF "Transilvania" on the 1% holding limit? The Constitutional Court has already ruled that the threshold is constitutional ... What other avenues of attack do you still have?

Gheorghe Piperea: In autumn, we will return with our lawsuit to the Court of Appeal. For now, our claim to an unconstitutionality exception has been rejected. Perhaps out of habit, the judges of the Constitutional Court have rejected it, because they did the same thing when Cătălin Chelu raised the issue, even though we have invoked an entirely different exception. We claim that the Government Ordinance by which art. 286, index 1 of the capital market law was amended, has expired ever since 2009, because it was submitted to the Senate about seven days later than the maximum delay stipulated in the Constitution and about 25 days past the deadline with the Chamber of Deputies.

Reporter: What will happen if the courts find that the Ordinance isn"t applicable?

Gheorghe Piperea: The 1% cap will fall. That doesn"t mean, however, that the old cap of 0.1% will return, but rather that the SIFs will be able to hold General Shareholder Meetings to set their own individual holding caps for investors by amending their bylaws. For now however, the only SIF that has the real possibility to hold a General Extraordinary Shareholder Meeting is SIF Transilvania. The maximum holding cap of 1% at SIF3 was set following an Extraordinary General Shareholder Meeting, in 2009.

Reporter: We have a few months left until the expiration of the deadline given by the ECHR to amend the law for the compensation of former asset owners. Are you aware of the progress of the actions in this respect?

Gheorghe Piperea: No, I am not. We will probably find ourselves in the beginning of 2012 that the deadline wasn"t met, when it comes to finding a solution to the issue of compensation and that the lawsuits that have been suspended during the time we had available to revise the legislation will be upheld, which means that the Romanian state will have to pay tens of millions of Euros in damages. We will have to see how it will come up with that kind of money, especially since next year will be an electoral year.