EBRD to offer Euro 1-100 mln for stock in local companies

While most portfolio investors are turning their backs on the local market, due to an aversion of high risk, the European Bank for Reconstruction and Development (EBRD) is looking for equity opportunities in Romanian companies.

"We can become shareholders in a company with any amount ranging from €1 million to €100 million, the bank's Senior Banker specialized in equity for South-Eastern Europe, Caucasus and Central Asia, Peter Stredder, told Business Standard. He did not provide further details regarding the total amount that EBRD plans to invest in Romania. He said, however, that the bank is analyzing the market, and is even accepting business plans for financing.

"Private equity funds are very cautious, and we are observing scarce [investment] activity on the market, which is an advantage for us. Furthermore, as opposed to them, we are only interested in minority stock, because we are compelled to do this by virtue of our by-laws, and are much more flexible regarding the timing of our exit," Stredder said. Furthermore, he added that the main advantages provided by EBRD are a capital of confidence with the bank being one of the shareholders and the fact that it provides better chances for a possible public offering on the stock market. "We cannot make an exact evaluation to say that we add 10 percent or 20 percent, for instance, to a company's value," Stredder stressed. A company that plans to secure financing by selling shares to EBRD must, first of all, accept minority shareholders, and understand that this financing method is very expensive for shareholders. Another financing option is borrowing money, either through EBRD directly or through its partner banks, Stredded added.

EBRD is interested in a company's profitability, investments in production efficiency and the quality of management. It is mainly looking to invest in companies involved in agriculture, industry, energy, telecom, and even media, according to EBRD Manager for Romania, Claudia Pendred. On Friday, the bank announced it injected €6 million in the Pehart Tec paper producer, which it called its first equity investment in a private non-banking company on the local market. The lender will receive a minority share package in exchange for its funding.

The money will be used for the internal production of the company's required energy, set to lower the annual electricity bill by as much as €1.5 million. The exact participation of the bank in Pehart Tec is yet to be decided by the company's performance, according to its President, Ioan Tecar. This means that good performance will translate into a smaller share package for EBRD, and vice versa. Following the deal, the lender will appoint one member to the company's Board of Directors.

Business Standard