Libra Internet Bank SA has announced the early call-in of the loan granted to Hidroelectrica

• Euro Insol: "Other banks may also call-in their loans early, prior to the insolvency being declared"

On June 19th, Libra Internet Bank SA has sent a notification about the early call-in of a loan to Hidroelectrica, according to a report by Euro Insol, the receiver of the energy maker. On June 20th, the Court of Bucharest admitted the request of Hidroelectrica to file for insolvency, for the purpose of reorganization.

The entire balance of the loan granted by Libra Internet Bank, (11.958.082 lei), became fully payable. The loan was guaranteed by assigning the receivables which Hidroelectrica had to earn from EF Electrica Furnizare Transilvania Sud and through the pledge on all the accounts opened with Libra Bank SA.

According to Euro Insol, the bank said the decision was caused by the company's failure to file the second quarter reports for 2011, by its deteriorating financial situation and by the fact that the degree of coverage of the balance of the loan became inadequate (it was no longer covered by the collateral).

The Euro Insol report states: "Considering the depreciation of the financial and economic indicators of Hidroelectrica and the levels which were stipulated in the loan agreements, we consider that other banks may call-in their loans as well, which would have led to the default of Hidroelectrica. ON December 31st, 2011, Hidroelectrica owed a total of 4,146,751,166 lei, of which 2,639,156,284 lei were debts with less than 1-year maturity, and 1,507,594,882 lei debts with more than 1-year maturity".

Out of the total loans with a maturity of less than 1 year, 1.09 billion lei are loans, 1.1 billion lei are commercial debts and 258.6 million lei are granted dividends.

Euro Insol claims that the cashflows generated by the activity of Hidroelectrica, in general and through the day-to-day operations, are insufficient to finance the working capital, and to finance the retooling and investments, meaning that the company is relying significantly on outside lending sources, by taking out loans and credit lines. Thus, the company's net cash flow was negative between 2009 and 2012, to as much as 659 million lei on May 31st, 2012 compared to 309 million lei on December 31st, 2011.

According to the report by Euro Insol, on June 27th, 2012, the executives of all the banks which were lenders of Hidroelectrica was held in the presence of the Prime Minister, of the Finance Minister, of the Minister of the Economy, of the Vice-Governor of the National Bank of Romania and of the representatives of the shareholders, where the premises and the objectives of the insolvency procedure which was begun were discussed. The banks were assured that they would not suffer losses through the insolvency procedure, when it comes to the repayment of the loans.

Starting with July 5th, 2012, meetings with the lenders were held weekly, in order to provide periodic and transparent information on the financial situation of the company and to present the actions of the receiver taken after the insolvency procedure began. The meetings have also been attended by the representatives of the National Bank of Romania and of the shareholders of Hidroelectrica.

Between the opening of the procedure and up to last week, all the loans and credit lines were repaid according to the maturities stipulated in the contract, to the tune of approximately 33 million Euros.

As a result of the requests of the banks, the receiver and Hidroelectrica began the procedure to engage a credit line from Eximbank, in order to issue letters of bank guarantee in favor of the lender banks, which would partially cover the credit risk. Euro Insol denounced the direct contracts concluded by Hidroelectrica SA with Energy Holding, the companies of the Alpiq group, EFT and Euro PEC. Many loans used the revenues from those contracts as collateral.