Wednesday, October 16, 2013

One Rail Freight Group Deal Falters Whilst another Cargo Carrier Goes Up for Sale

Saga of Privatisation of European State Track Assets Continues
Shipping News Feature

ROMANIA – POLAND – The long awaited privatisation of the Romanian state owned rail freight company, CFR Marfa, has fallen through after private rail operator Grup Feroviar Roman SA (GFR), failed to come up with the €202 million it needed to purchase a 51% stake in the cargo company. The sale of the country’s rail freight system was a mandatory provision outlined in an agreement in 2011 with the International Monetary Fund (IMF) and the winning bid was detailed in an earlier story.

GFR, which is controlled by Gruia Stoica, a Romanian billionaire and head of the Grampet Group, which owns rail assets of various types in Serbia and beyond, needed to have paid the full amount by Monday October 14 after paying an initial €28 million deposit, which it now stands to lose. There had been reports last week that the deadline could be extended to as far as December 20, but with that gone, the blame game has now come into play with Transport Minister Ramona Manescu citing both GFR, which could have paid by ‘giving up the suspensive conditions in the contract’, along with Romania’s privatisation committee OPSPI which had the responsibility to ‘manage this process of privatisation in favour of the Romanian State’.

On the other hand, GFR said that it did have the money but added that the transaction failed because of CFR Marfa’s creditor banks, which had ‘not agreed to the change in ownership’, and the Competition Commission, which didn’t have enough time to assess the transaction. It is the second time the sale of CFR Marfa has failed, with the first attempt unsuccessful as the three bidders had not met the conditions for the sale. Manescu has confirmed that CFR Marfa will be put out to tender for the third time.

On the back of this arduous attempt to sell a national rail freight carrier, Polish State Railways (PKP) has announced plans to float nearly half of its cargo unit, PKP Cargo, on the Warsaw Stock Exchange, at the end of this month. PKP is selling 21,669,007 shares (50% minus one share) at a maximum price of zł74 each, valuing the floatation at zł1.6 billion (over €380 million).

The funds raised from this IPO will go to repay some of the debts amounted by PKP, which has been estimated at around zł4 billion at the end of 2012. The state railway faces large debt repayments in 2014 when zł1.6 billion of debt is due. The privatisation process of PKP Cargo started in 2011 when the company was put for sale to strategic investors.