The amount of the foreign corporate debt stays flat – in November 2011 it was 25.12 billion euros, just as at was the end of 2011. What cannot be ignored is that commercial banks from the more developed European economies do not appear to share the view of Bulgarian politicians for the local financial stability I charge a substantial risk premium of 4-5% when it comes to loans for Bulgarian company. And this seriously damages the local companies who have no foreign owners.
More interesting is what alternative behaviour chose to adopt Bulgarian companies and whether what officially is listed as a debt, indeed is one and if it is external at all.
The head of the Bulgarian Industrial Association Danev expressed before the BANKER his strong doubt about it. According to him, in the form of external debt some local players hide added value. He would not comment on how it works, but confirmed that part of the private debt is not debt, but intra-financing, ownership transformation or just a simple accounting trick to hide taxes.
One of the schemes which are working is an offshore company owner. It provides financing through debt to a Bulgarian company. This is a long-term funding that must be repaid over the years. So, each year the accounting reports display expenditure that trims the actual revenue in the annual financial statements and companies often record negative financial results.
Lately, however, things are adjusted so that there is minimal profit for the local entity because it is important for talks with banks who are not really open to companies working in the red figures, commented accountants.
Through an offshore company or not, another practice is to take a loan, given to a company supplier of equipment for a Bulgarian company. The supplier sells the machinery and equipment artificially overpriced. In order to pay for it the Bulgarian contractor charge higher depreciation. This on its turn raises costs imbalances the revenue and company gets out of the profit margin. This is one of the most popular forms of saving of taxes, auditors told the BANKER.
There is another legal trick: foreign-owned companies can rely on external support. This is evident from the data of the Bulgarian National Bank, where there is a special column called internal corporate debt, which considers all loans and deferred payment options that foreign companies provide their subsidiaries here with. In fact, these tools form the largest part of the gross domestic debt of the Bulgarian economy.
These home loans are very beneficial for the Bulgarian subsidiaries of multinational companies than it would be for them to borrow from local and even from foreign banks. According to insiders, the interest rate policy here is an internal affair of the company, and it often has nothing to do with the market and interest rates are fixed every month.
Analyst Dimitar Chobanov says that this type of financing – from parent – to daughter comoany will continue to grow with the moving of the Bulgarian economy out of the post-crisis depression. Chobanov explained that this is not external financing but foreign direct investment, although analysts at the Central Bank define it as a permanent component with special qualities – low risk and easy to reschedule.
The BANKER
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