Eurohold Bulgaria Goes Ahead with Regional Expansion Despite Crisis, Urges Govt Support

Outside Bulgaria, the holding group is present with its insurance sub-holding Euroins Insurance Group (EIG) in neighbouring Macedonia, Serbia, Romania and Turkey. It has auto leasing operations in Bulgaria, Romania and Macedonia, and is planning acquisitions of auto dealers in Macedonia and Romania and of a leasing company in Romania, the group's managing board chairman Kiril Boshov told an annual investors' meeting.

The group will search for companies in distress or in a pre-bankruptcy state to strengthen its positions both on the local and foreign markets and will rely on acquistions through capital increases rather than outright buying, the group's supervisory board chairman Asen Asenov told investors.

PLANNED EXITS/ENTRIES

The group will focus on its three core businesses and will exit non-core operations such as medical equipment manufacturer Etropal, minerals and industrial products testing and analyses maker Eurotest Control, and the Etropole hydropower plant, with an installed capacty of 750 kilowatts.

"The sale of Etropal will maybe take place in the middle or at the end of next year," Borislav Feschiev, managing board member in charge of buying, selling and restucturing, told the meeting.

"We can expect to have a deal for Eurotest Control in the next couple of months," Feschiev added.

Hit by the crisis, Eurohold Bulgaria delayed by one year the launch of its insurance operations in Turkey where it bought 90% of general insurer Inter Sigorta for 427,000 euro in early 2009. The Turkish insurer has been idled for years and there were plans to resume its operations in the second half of this year.

"There will be a decision on resumption at the beginning of 2010 or in the year's second quarter," Boshov said.

The group also has to make up its mind on its insurance business in Serbia where it owns 10% of Takovo Osiguranje following a 3.65 million euro deal struck last year.

"A further investment in the company is inappropriate at the moment," Boshov said, adding that Serbia is currently suffering political and economic instability.

Eurohold Bulgaria plans to make a final decision whether to exit the Serbian company in 2010. "There are two options: to buy a majority stake or sell the 10% stake," he said.

The group now targets a car dealer in Romania with sales of 44 million euro and 3,800 cars sold in 2008, a car dealer in Macedonia with 1,000 sold cars and sales worth 12 million euro last year, and a leasing company in Romania suffering financial difficulties, aiming to expand its leasing business in Romania.

STEADY FINANCES

Eurohold Bulgaria sees its consolidated net profit edging down to 8.4 million levs this year from 8.5 million levs in 2008, while sales are expected to rise 11% to 412 million levs.

The holding group reported a 4.0 million lev net loss in the first half of 2009 resulting from the sale of 19.2% of EIG to private equity fund Global Finance for 24.6 million euro. The deal was wrapped up earlier this year.

Another one-off effect on the holding group's financial performance in 2009 will be the sale of its wholly-owned subsidiary AvtoUnion Center to private equity investment fund Bluehouse for 27.3 million euro that took place last week. Eurohold's accounting gain from the sale is 7.0 million euro, the group said.

FINANCING OPTIONS

Eurohold Bulgaria has succeeded to diversify its financing sources since the global crisis hit, thus overcoming tougher lending conditions imposed by Bulgarian banks, Boshov said. The group has issued bonds and attracted mezzanine financing.

In September last year, Deutsche Bank said it arranged financing of up to 200 million euro ($248.3 million) through securitisation of receivables for Eurohold's Bulgarian leasing unit as part of the long-term development strategy of Eurohold Bulgaria to achieve synergy among the companies in the group.

"We are now working on a new project for external financing for our leasing business from a very authoritative financial institution," Boshov said without mentioning names.

"We plan to finalise it around Christmas."

A requirement of the international lender is a local bank to have a 10-15 percent participation in the credit line but Bulgarian banks have tightened lending, Asenov said.

"Here the government can intervene through the Development Bank."

The Bulgarian Development Bank, formerly Encouragement Bank, provides lending to small and medium-sized enterprises (SMEs) aiming to promote their exports.

Eurohold Bulgaria (www.eurohold.bg), set up in 2006, plans to complate the consolidation of its three core business in sub-holdings by the end of next year. It employs some 3,600, including 1,600 in Bulgaria.

Shares of Eurohold Bulgaria, part of the blue-chip SOFIX index on the bourse in Sofia, gained 1.31% to 1.55 levs in a volume of 10,771 stocks on Wednesday.

(1 euro = 1.95583 Bulgarian levs)