site.btaBulgarian Development Bank Would Have Lost BGN 140 Mln in Interest from BGN 1 Bln Bond Issue

The Bulgarian Development Bank (BDB) said in a press release on Tuesday that it decided against going ahead with a BGN 1 billion fixed-yield seven-year bond issue because, under the changed conditions, the bank would have lost BGN 290 million annually in interest or BGN 140 million for the whole period.

The wholly state-owned bank specified that the decision was prompted by the adverse situation in the global financial markets which practically closed for several months after the outbreak of the war in Ukraine in February 2022 and the simultaneous increase of interest rates by central banks.

The explanation reacts to allegations made public by the GERB party on Monday, according to which BDB spent BGN 1 million on fees to consulting and law firms hired to consider all aspects of the prospective bond issue even though it was never released.

"Law firms were selected in accordance with the BDB internal rules, and the terms achieved were market terms," the bank said regarding the huge cost of legal and consultancy services.

GERB also alleged that the BDB Management Board single-handedly decided to terminate the procedure, without a decision by the bank's principal who, at that time, was caretaker Economy Minister Kiril Petkov (now leader of Continue the Change).

In response, the BDB argued that, under Bulgarian legislation, the launch of the procedure did not require a decision of the principal but was an entirely day-to-day process conducted by the bank's governing bodies. "The bond issue project was coordinated with three successive line ministers and two finance ministers, owing to the frequent change in the executive," the press release said. 

"Regarding the allegation that the BBD spent another BGN 560,000 on lawyers and consultants over the last 18 months, we would like to specify that these costs were incurred on a non-performing loan extended during a previous period. It was subject of a lawsuit abroad which the bank won," the press release said.

In a related development, on Tuesday Petkov dismissed GERB's allegations as "yet another lie". He argued that the BDB debt issue decision was made on October 21, 2021, i.e. while the second caretaker cabinet appointed by President Rumen Radev was in office. The decision to terminate the issue is dated November 10, 2022, i.e. under the incumbent caretaker cabinet, again without any involvement of Continue the Change, Petkov said.

Continue the Change MP Daniel Lorer insisted that the bank's management was entitled to solicit additional sources of financing. He recalled that when his party came to power, BDB posted a BGN 70 million loss, while in September 2022 it showed a BGN 30 million profit.