The Slovenia Times

Brussels Gives Green Light to Recapitalisation of NLB


Slovenia planned to issue EUR 320m worth of contingent convertible bonds (CoCo bonds) and inject EUR 62.9m in equity to improve its Core Tier 1 ratio from just below 6% to 9% in line with the requirements from the European Banking Authority (EBA) and Slovenia's central bank.

However, the plans for the recapitalisation so far included EUR 61m to be raised in share capital to raise NLB's Core Tier 1 ratio to 7%, a threshold for issuing CoCo bonds.

In line with the original plan, NLB's second-largest owner, Belgian financial group KBC, was to provide the EUR 61m to increase its stake in the bank to 33.9%, but the group withdrew on Friday.

Speculations followed that the European Commission had demanded of KBC not to take part in the capital increase, but this was denied today by European Competition Commissioner Joaquin Almunia, who stressed the Commission had no opinion about KBC's participation in the NLB capital injection.

Almunia said that although KBC must sell its stake in NLB under a restructuring agreement with the Commission, KBC could offer an alternative and sell an equivalent stake in another bank.

When the Commission faced KBC with the alternative - selling an equivalent stake in another bank - KBC changed their mind and pulled out of the NLB capital increase, Almunia explained.

While the Finance Ministry expressed regret over KBC's decision, it said that this had not jeopardised the recapitalisation, as funds would be secured from the reserves of the state-run funds KAD and SOD.

"The Commission has approved the state aid for six months, to give NLB and Slovenia time to submit an updated restructuring plan, taking due account of this additional state support," today's press release from the Commission reads.

The Commission also opened an investigation into NLB's restructuring plan which Slovenia had submitted for the bank after the approval of last year's recapitalisation of the bank.

At this stage, however the Commission doubts that the proposed measures will enable the bank to become viable without continued state support.

The commission also expressed "concerns that the bank's own contribution to the costs of restructuring may be insufficient" and announced that it would verify whether the plan foresaw appropriate safeguards to limit the distortions of competition brought about by the state support.


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