The financially troubled state railway operator Bulgarian Railways (BDZ) will obviously have last chance to get back on its feet. During the week, the Ministry of Transport announced that it had received a special letter of support sent by the Directorate General Competition of the European Commission. It states that Brussels accepted the national government to help the restructuring of the company.
The positive signal is the result of the talks held last week in the capital of the European Union during which Minister Nikolina Angelkova provided additional analyzes and arguments to accelerate the process for notification of state aid for the public carrier.
„… During our meeting you recently informed me of the progress of the Bulgarian negotiations with international creditors of Bulgarian Railways and asked me to give you the position of the Directorate General for Competition to the planned cancellation of debts of 172 million levs that the state company had accrued before Bulgaria joined the European Union in 2007. Based on information provided by the Bulgarian authorities, this measure fulfills the conditions set out in the Guidelines on State Aid for railway undertakings providing the basis for declaring the cancellation of the debts of transport services providers accrued before EU accession or before the liberalization of the sector,“ said the official document signed by Gert-Jan Koopman, Deputy Director General of State aid policy in the Directorate General for Competition.
Besides easing the state railways with 172 million levs, the letter practically unties the hands of the Transport Ministry to negotiate with the creditors of the state enterprise – German banks KfW and FMS Wertmanagement, Austrian KA Finanz, the French-Belgian-Luxembourg Dexia and the French BNP Paribas, regarding possible rescheduling of the other debts of the railroad operator.
The total obligations of the holding on 30 June this year came to 583 million levs. Overdue payments are less than 170 million levs, and approximately 140 million out of them are to the above mentioned major financial creditors and 32 million levs are to the state budget for old loans, for which state guarantee clauses had been activated. Because of these debts, the company started selling valuable assets of its own, which are otherwise necessary for its activity as a carrier.
Last year the country expected green light from Brussels for subsidizing Railways with the revenue from the sale of BDZ – Freight but privatization was canceled by the cabinet Oresharsky. Then the government renewed its request to the EC for allowing state aid, but it got green light only now – during the mandate of the new government.
„For us the support that we were given by the European Commission is very important to renew the dialogue with the creditors of the state railways. A forthcoming meeting with them and bondholders of the company will discuss the possibility of rescheduling. The first step has already been made, since with this letter EC ruled that there was no violation of the law relating to competition and certain state aid to BDZ may be granted,“ said Minister Angelkova. She added that there is still a lot of work to be done to improve the company’s financial performance.
„BDZ Holding and we, as a principal of the company, have shown that we are taking concrete actions to fulfill our commitments to the creditors, such as regular monthly payment of amounts due to them and that we are ready to continue with a constructive dialogue,“ she added.
However, the next big test will be the rehabilitation plan of the railways. Insiders say that there are more than eight versions of the document, but no one wants to comment on the details before actual negotiations with creditors start. Each of the drafts, however, includes, according to them, a restructuring plan for the repair services unit. What may be expected is the current 12-13 repair bases located throughout the country to fall in numbers, but to be far better equipped.
The most controversial point in the recovery plan remains the imperative for optimization of staff in Railways, which unions strongly oppose. However, if reforms are not made, the sum of 172 million levs will prove to be just another drop engulfed by the financial swamp of the national railways from the recent years.
The BANKER
