The FINANCIAL — After a 2 year gap the European Bank for Reconstruction and Development is back in talks with Bank of Georgia, largest bank in the country by assets. The EBRD Board of Directors is negotiating new conditions for the purchase of Bank of Georgia’s shares for a short period.
“We are negotiating with EBRD. It will become a shareholder of Bank of Georgia after one or one and a half year period,” Nicholas Enukidze, Chairman of the Supervisory Board of Bank of Georgia, told The FINANCIAL.
"We are very pleased about participation of EBRD, as it will strengthen the leaders position, which our bank already has ", Enukidze said.
In May 2006 The EBRD sold its 11.8 percent stake in Bank of Georgia. The stake was originally bought in June 2000. “The EBRD’s role in supporting the transition of this bank is now complete,” said Kurt Geiger, EBRD’s Business Group Director for Financial Institutions, 2 years ago. “The EBRD is confident that private sector institutions will now fully participate in the future of the bank and support the next stage of its development,” Geiger said in May 2006.
A meeting with Bank of Georgia’s management has already been held.
“Now we have negotiated a package with Bank of Georgia which includes convertible options,” Michael Davey, EBRD Director for the Caucasus and Belarus, told The FINANCIAL.
“EBRD was at the head of support of Bank of Georgia, it had a successful IPO but now the market has changed. Today Bank of Georgia is an excellent bank. We would like to invest in BoG, so we have come back again,” Davey says.
On November 29, 2006, Bank of Georgia listed its shares in the form of Global Depository Receipts (GDRs) on the London Stock Exchange (LSE: BGEO). On 12 February, 2007, Bank of Georgia successfully closed its USD 200 million debut Regulation S 5-year senior unsecured Eurobond transaction, the first international bond offering from Georgia.
According to the London Stock Exchange share price of BoG peaked in July 2007, reaching its all time high at USD 43 per share. On 1 December 2008 price per share was fixed at USD 4.1.
As Davey says, details of the deal will be released on December 16.
As of April 30, 2006, the bank had GEL 624.7 million in assets and GEL 100.7 million in equity. In 2005, the bank earned net income of GEL 13.6 million. The bank has a B-/Stable outlook from FitchRatings and B3/NP and Baa3/P-3 local currency ratings from Moody’s with Stable outlook.
EBRD was replaced by Bank Austria Creditanstalt which purchased 2,042,349 common shares of the bank. Galt & Taggart Securities, the wholly-owned investment banking subsidiary of Bank of Georgia, acted as local broker on this transaction.
For that period Bank Austria Creditanstalt owned, on behalf of its institutional clients, 22.9% of the bank’s common shares.
The European Bank for Reconstruction and Development was established in 1991 when communism was crumbling in central and Eastern Europe and ex-soviet countries needed support to nurture a new private sector in a democratic environment. Today the EBRD uses the tools of investment to help build market economies and democracies in countries from central Europe to central Asia.
“The total amount of EBRD’s credit portfolio in Georgia in 2007 was USD 700-800 million. The number rose by 50% in 2008,” as top banker of EBRD Georgia, Irakli Mekvabishvili, says.
USD 300-350 million was used by the banking sector. EBRD owns shares of three leading Georgian banks; Basis Bank, Bank Republic and VTB Bank Georgia. Furthermore EBRD plans to buy shares of Cartu Bank. This was confirmed by Mekvabishvili.
On 11 August 2008, 4 days after Russian forces invaded Georgia Michael Davey told Reuters that, “Before the conflict started, Georgia’s primary economic issue had been covering its current-account deficit, one of the widest in Europe at some 20 percent of gross domestic product, as well as tackling inflation.”
Commenting on Georgia’s resources Davey said “Kenya probably has more sustainable sources of income than Georgia does.”
Written By Madona Gasanova