An equity investment of up to US$ 16.8 million, limited to a maximum 35 per cent share in UBB's total shareholders' funds.
The project objectives are to privatise and recapitalise UBB, in order to achieve high capital adequacy and thereby contribute to restoring confidence in the Bulgarian banking system.
In addition, the Bank's investment (and the associated technical assistance) will strengthen UBB's institutional development and enhance its ability to provide term lending to the private sector. Furthermore, this will raise UBB's international profile in terms of attracting a Western strategic investor.
The project will have a significant impact on the transition through: i) its considerable demonstration effect as the pilot bank for privatisation in Bulgaria; (ii) the enhancement of UBB's term-lending capacity, resulting in provision of such lending to the private sector; and (iii) the development of an effective and market-oriented financial sector in the country.
United Bulgarian Bank (UBB) is a universal bank organised as a joint-stock company under the laws of the Republic of Bulgaria. Set up through the merger of 23 state-owned banks (mainly former branches of the Bulgarian National Bank) in May 1992, it has an extensive branch network and provides a full range of products and services.
UBB is currently 99.6 per cent owned by the Bank Consolidation Company (BCC), an institution managing the state interests in the local banking sector. The bank was recently targeted for privatisation by the end of 1997 as part of the IMF Stabilisation Programme for Bulgaria.
An equity investment of up to US$ 16.8 million (ECU 13.1 million), representing 35 per cent of UBB's total shareholders' funds.
The project is structured in two phases: (i) purchase of UBB's shares from the BCC; and (ii) subsequent pro-rata capital increase by the EBRD and the other investors.
Up to US$ 48 million (ECU 37.4 million). The EBRD will co-invest alongside Bulbank and Oppenheimer & Co. Inc. Formerly the Bulgarian Foreign Trade Bank, Bulbank is the largest and most reliable bank in the country and still state owned. It will hold 35 per cent of UBB's equity. Oppenheimer & Co. Inc. is an investment bank servicing corporations, institutions and private investors worldwide, which will acquire 30 per cent of UBB's equity (for itself and as an agent for various funds and accounts).
Having no direct impact on the environment, the project has been classified C/0. The bank will carry out its operations in accordance with the EBRD's Environmental Procedures for Local Banks, which provide for integration of environmental due diligence into the credit and investment appraisal processes, and for borrowers' compliance with national health, safety and environmental regulations and standards. UBB will submit annual environmental reports to the EBRD.
In the pre-privatisation phase, consultancy assistance was provided for audit work, due diligence and preparation of business and restructuring plans.
In order to facilitate the project preparation, the EBRD arranged a two-year Twinning Programme between UBB and the Allied Irish Bank. The first year is due to be completed in September 1997.
Upon completion of the Twinning Programme, UBB will have benefited from technical assistance funds in excess of ECU 1.6 million.
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