SIFs discussing share capital increases with the market regulator

• Costel Ceocea, SIF2: "I personally feel that a share capital increase is necessary under the current market circumstances"

The managers of the five financial investment companies (SIF) have had several talks with the Romanian Securities Commission (CNVM) on the issue of a possible share capital increase, Costel Ceocea, the chairman of SIF Moldova said for BURSA. The share capital increase is just one of the measures that the FIC officials discussed with the officers of the CNVM, as the five companies have a plan to alleviate the effects of the crisis which includes several measures.

"We have to see exactly just how we could perform a share capital increase, and which provisions could be amended in this respect. The share capital increase is an older issue of the SIFs, which we felt we needed to approach again, due to the current market conditions", said Mr. Ceocea.

The financial investment companies had several attempts of increasing their capital, but almost of them were unsuccessful, due to their failure to raise the required quorum, due to the extremely high number of small shareholders that the FICs have. The only one that succeeded was SIF "Transilvania", in 2007, but the share capital increase was followed a lengthy string of trials, after one of the shareholders, "Cocor", challenged the share capital increase in court. SIF3 succeeded in increasing its share capital in 2007, thanks to the fact that its articles of incorporation do not include a minimum quorum requirement, unlike the other four FICs, which require a 75% quorum on the first annual extraordinary shareholder meeting, and 50% on the second.

A share capital increase could help the SIFs weather the crisis, now that they can"t rely on their traditional revenue sources, Costel Ceocea said:

"I for one think that a share capital increase of the FICs, is absolutely required at the moment, because we need cash. We have already been told that some of the largest companies that we have in our portfolio will not pay out any dividends this year, and other companies that we have stakes in will ask us to come up with the money to ensure their financial stability. The market is very harsh right now. For now it"s too early to discuss numbers when it comes to this capital increase. We have to meet with the officials of all the market institutions and with our shareholders, to discuss the best method to perform the share capital increase and any legal hurdles this operation could face", the chairman of SIF2 said.

A share capital increase would provide SIF2 with the cash needed to begin the buyback of its own shares, a move intended to raise the price of its stock.

"Another measure that we have discussed with the officers of the CNVM is the possibility for the FICs to buy back their shares on the exchange. For instance, removing the residual shares from the market could help stabilize the price of our shares, and we could later sell them once the market recovered. This measure would also be beneficial for the stock market, since it would help shake it out of its current lethargic state. However we need to decide on a price at which this operation would be performed", Costel Ceocea added.

Some of the items on the agenda of the meeting between the officials of the SIFs and those of the CNVM also include discussing the possibility for SIFs to buy stakes in each other.

"We haven"t yet reached a conclusion. What"s important is that we have succeeded in meeting more often with the officials of the CNVM and discussing this program intended to help us adapt to the current market environment", said Costel Ceocea.