Parex requests new syndicated loans

RIGA - Parex bank chairman of the board Nils Melngailis was set to meet with bankers in London this week with the hope of attracting new syndicated loans for the bank, writes Bloomberg. A loan “could be used either for new lending or to start repaying the state treasury,” said Melngailis. The bank may raise funds with “either a syndicate or through a bond issue.”
The bank chief complains that “The economy has just stopped, nothing happens, cars aren’t sold, houses aren’t built. There is a lack of lending, a void in the banking business.”

Waiting until after October’s parliamentary elections to sell Parex would be the “biggest mistake anyone could make,” warns Melngailis. A successful sale would help the state recover some of the money it spent on the bank after a run on deposits brought it to near collapse. The country spent about 724 million lats (1.0 billion euros) to boost deposits, and about 150 million lats to raise equity. “This is the place where the international lending money has gone,” Melngailis said. “As soon as the market sees most of that money come back, that will do wonders for the country’s rating as well.”
Parex bank says it has seen interest in buyers for the bank from European banks who are interested in the Baltic region. “If we could start the selling process in the second quarter, then there definitely is a chance that most of the sales process will be done by the end of 2010,” commented Melngailis.

He said this goal could be met if the government took a decision in the next two months to split the bank into two, one with good assets - the core assets - and one with non-performing – the non-core - assets. “Mostly they are European banks [which have expressed an interest], that see the Baltics as part of their future strategy,” said Melngailis.
Melngailis said any delays would mean the sale process would probably drag on as holidays in June and July would interfere, followed by a parliamentary election in October.

Nomura is advising the government on the restructuring. It is not clear how much the state would receive for Parex. The assets of the bank at the end of 2009 were 2.48 billion lats. Melngailis said that between 500 million lats and 1 billion lats of bad assets, mostly real estate, which is not a part of the bank’s core business, would be split from the bank and put into a fund, which could then be sold off.

“If the [sell-off] question is delayed, I would not be surprised if [the IMF] gets involved again, as the stability of the banking system and the bank’s restructuring is an important part of the state’s agreement with the IMF,” said Melngailis.
He said the bank was working actively to roll over deposits worth 300 million lats, frozen after the rescue, so it can lift restrictions on making new loans and on deposit withdrawals. A third of these deposits had been dealt with so far, said Melngailis.