Offshore shelf company grabs Krajbanka

An unknown offshore company was named the winner of the sale of a 25 percent stake in Latvijas Krajbanka, Latvia's seventh largest bank in terms of assets, after having offered the minimum price in a privatization marked by serious infighting.

While government officials expressed satisfaction with the state's last key privatizations, analysts and insiders called the sale a failure.

Dox Fund Limited, registered on the British Virgin Islands, bought the stake on the May 17 auction for 4.12 million lats (6.3 million euros), or 1.81 lat per share - the minimal price set for the auction.

A Latvian-speaking representative of Doxa Fund was present for the auction but refused to give any information whatsoever until the Latvian Privatization Agency approved the purchasing deal.

Privatization agency chief Arnis Ozolnieks said that Doxa Fund was very respectable, "otherwise it would not have been allowed to bid in the auction."

Ozolnieks said he was pleased that the auction had taken place in the first place, though he admitted that some more bidders could have raised the final price.

The privatization agency held an extraordinary meeting on the same day immediately after the auction and confirmed the auction results, with a purchasing deal expected to be signed in the coming week.

Latvijas Krajbanka, Latvia's seventh largest, used to be the Latvian branch of Sberbank, the Soviet Union's monopoly retail bank that stretched across the former 15 republics.

As a result, it has the largest number of branches and client servicing centers across Latvia, and it handles over 91 percent of the privatization certificate accounts in Latvia.

Bank management said it was pleased with the auction results, stating that they hope a serious investor has been found for the bank who will take an interest in its development and be able to invest in the financial institution according to the banks seven-year development plan.

Economy Minister Juris Lujans said he was pleased with the results of the auction, especially with the fact that the state budget will receive over 4 million lats.

"This is a great achievement, considering the actions of current shareholders attempting to degrade the image and prestige of the bank," said the bank's adviser Iveta Balode.

Three large private owners in Latvijas Krajbanka – Ventamonjaks, Kalija Parks and Ventbunkers – which together own some 26 percent of the bank, tried to stop the privatization from proceeding through court appeals.

All the appeals, however, were turned down.

One minor shareholder in the bank is Ventspils Mayor Aivars Lembergs, who has come under increasing criticism from government officials for his statements on his alleged private interests.

Lujans said that these scandals had harmed the sale, preventing more bidders from signing up for the auction.

Guntars Vitols of Parex Asset Management said that the auction was a failure as the shares were sold for the minimum price.

He also said that having an unknown company buy the shares in one of the country's biggest banks was "simply sad."

Vitols said that the offshore company could be related to any of the current shareholders in the bank, as the privatization was held in a tight time frame and serious bidders were unable to get fully acquainted with the real situation at the bank before the auction.

He added that serious companies usually don't hide behind "little offshore offices."

Janis Neimanis, analyst at Baltijas Tranzitu Banka, said, "Congratulations on such a good buy at such an attractive price. It's only sad that the weather forecast is taken into consideration but not [the opinion of] financial market experts."

Neimanis explained that the auction result proves that the bank's sell-off model was completely wrong.

"I hope that such a sell-off model for state stocks is used for the last time, clearly showing that maximum revenues were not achieved."

Hansabanka head broker Janis Ogsts said that he hoped the company would soon announce who and what it was, though he added that he was sure that a local company was behind the offshore.