SIF Muntenia Raises 40 Mln USD To Buy Back Half Of Its Shares

Financial Investment Firm (SIF) Muntenia's strategy for the next few years is to use its profit, wholly or partly, to ensure the liquidities necessary to buy back the residual shares after the enactment of the new securities law. For the time being, residual shares account for nearly half of SIF Muntenia. These residual shares originate in the allocation of shares (to all those who used their ownership certificate within The Mass Privatization Process - PPM) in each SIF, on the count of the dividends due to The Private Ownership Funds (FPPs) between 1992 and 1996.

As SIF Muntenia was due the largest part of the total sum due to SIFs, it granted 23 shares to each PPM shareholder in 1997. In the meantime, residual shares have increased to 50 shares/shareholder, subsequently to capital increases equal to the value of the dividends left unclaimed. The other SIFs granted between five and ten residual shares per shareholder. Teodor Mihaescu, president of Muntenia Invest, the firm that manages SIF Muntenia, told "Bursa" that the amount of liquidities necessary to buy back the residual shares in SIF Muntenia could be derived from SIF Muntenia's profit, or from the sale of substantial share packages held in other companies. SIF Muntenia needs some 40 million USD to retrieve all residual shares and, if it chooses to sell some of its portfolio, it may lose some of its best placements.

After the buy-back is completed, SIF Muntenia could nullify the residual shares or sell them. The latter option would be the best for the firm, as the money would go back to SIF Muntenia's accounts while the liquidity of its shares would increase substantially. Mihaescu believes that SIF Muntenia shares are less liquid than the shares in the other SIFs particularly because half of them are stuck in the hands of small shareholders of whom most are even unaware that they own the respective shares.

The plan proposed by the firm managing SIF Muntenia to refrain from disbursing any dividends over the next few years and work as a growth fund may displease those shareholders who would rather receive dividends every year. It remains to be seen whether the shareholders will agree to do without their dividends for a few years and vote accordingly next year.