Central bank might sell its stake in Optiva Bank

The Baltic Times, TALLINN
Aug 26, 1999
Kairi Kurm

 Rumors of a possible new major investor in Optiva Bank caused some excitement on the stock exchange last week.  The share price of Optiva Bank rose twice in August, when investors were expecting the central bank to sell its majority stake in Optiva Bank to a new investor.

Eesti Pank, Estonia’s central bank, admits that several negotiations have been held with different investors for the sale of its majority holding in Optiva Bank, but no concrete agreements have been reached so far.

“The negotiations started a long time ago, and we are planning to sell the stake,” said Andrus Kuusmann, Eesti Pank’s spokesman. “We don’t know when it will happen, because we have not set any time limits. It would be good if it happened this year, but the next year would also be very good.”

Eesti Pank assumed control over the troubled Forekspank and Investeerimispank on Oct. 1 last year. The bank was renamed Optiva Bank after the merger.

The central bank bought a majority share in both merging banks for about 250 million kroons ($17 million).

Several sources claim that Finland’s Sampo insurance group may be interested in acquiring a majority stake in Optiva Bank, the Baltic News Service reported Aug. 18.

Olavi Laido, general director of Sampo’s Estonian subsidiary, admits that neither he nor the Finnish office has heard of such things.

“Sampo is active in insurance business. It is unthinkable that a company, which is presently involved in merging insurance companies, is also dealing with the purchase of banks,” said Laido.

Olavi Lind, a broker from Hansapank, said that rumors about Optiva Bank have been going on for half a year now. He believes that Sampo is still specializing in insurance and the Scandinavian Merita Nordbanken, which has a representative in Estonia, might be the potential candidate instead.

“But they have said that they do not want to expand through the purchase of other banks,” said Lind.

He said that if the transaction is to happen, the share price will be over 10 kroons. The market price of an Optiva share closed at 11.80 kroons on Aug. 23.

The share price made two sharp moves in August, rising 9 percent Aug. 6 and 5 percent Aug. 17.

Lind said that the prices are moving slightly up and down on the stock exchange all the time, because the market is not liquid and there is not much concrete information.

He also said that the economic results of the Optiva Bank for the first half-year were not as good as to result in a price increase. Optiva Bank reported a profit of 8.7 million kroons for the first half of the year. The bank had 3.3 billion kroons in total assets.

Source:  http://www.baltictimes.com/news/articles/713/

Estonia to merge TV and radio

The Baltic Times, TALLINN
Aug 19, 1999
By Kairi Kurm

 In an attempt to solve the budget problem, the Ministry of Finance proposed to cut the budget of Estonian TV and Estonian Radio by half by merging the two companies.  This would save the government 86 million kroons ($5.9 million) in next year’s state budget, which has been cut by nearly 1 billion kroons after the GDP estimates for the next year were revised down.

“We came out with a maximum cost cutting alternative,” said Daniel Vaarik, adviser at the Finance Ministry. “The Ministry of Culture is to decide which programs are necessary and which are not. None of the important programs will be liquidated, and the quality must not suffer.”

“We do not know at this point, how to restructure these two companies and make them work more efficiently. We cannot tell how much it will cost,” Vaarik said.

The representatives of both ETV and ER have expressed negative feelings towards the proposal of the Ministry of Finance.

Ain Saarna, deputy director general at the ER, said that this kind of unification is unreasonable. “We do not have a joint production base, so it is not possible to cut costs in the first stage,” said Saarna.

“Dismissing 5 to 10 people will not generate any profit either. ETV and Radio work in different buildings and in different technical circumstances.”

“If ETV and ER were to have a joint budget, ETV would use most of it or keep the same cost level and ER would have to cut many times over,” said Saarna.

Both ETV and ER have managed to work within the limited budgets planned at the beginning of the year.

Anneli Viita, head of finance at ETV, said that all ETV resources are used with maximum efficiency, and if the new system is to stay the same, the savings will be of insignificant importance.

According to the press, ETV and ER are planning to dismiss hundreds of people this autumn. At present they employ a total of 800 people.

Saarna said that ER has decreased the number of employees by 300 during the last five years and has currently about 300 employees, 100 of whom are related to program production.

ETV and ER had an equal number of employees or 800 people each when the two separated in 1991, but ETV has not dismissed as many employees as ER has.

“The Estonian society will lose nothing if ER is quiet one day,” said Rein Lang, head of a competing radio chain, to the daily Postimees.

Saarna said it was important to have a radio station, which was free from political and economic pressures. “If Estonia wants to join the European Union, it has to have a public broadcasting corporation. If we want to be part of the Eastern bloc, we do not need it.”

Aripaev, the Estonian business daily has suggested the government should privatize ETV and ER and buy media time, if necessary, from private stations. “This sum will definitely be smaller, than the 97.5 million kroons set apart for ETV and 82 million kroons for ER. The government will keep up one structure, which is responsible for the use of money, instead of two colossi,” wrote Aripaev.

Source:  http://www.baltictimes.com/news/articles/666/

Estonia to construct the biggest arena in the Baltics

The Baltic Times, TALLINN
Aug 12, 1999
By Kairi Kurm

A Finnish construction company together with the city of Tallinn, the Estonian Basketball Association and the Estonian Olympic Committee are planning to build a large culture and sports arena in Rocca al Mare. Construction will begin as soon as full financing for the 175 million kroon ($11.97 million) project is available.

25 million kroons have to be raised from the sale of seats to guarantee the 75 million loan from Nordic Investment Bank. The seats are sold as shares to companies and private persons.

The hall, which can accommodate 6,000 people during sports events and 10,000 people for entertainment events, is the biggest of its kind in the Baltics, said Riho Remmel, the manager of the arena project. The arena, which is 40 meters wide and 80 meters long, can be divided into three smaller sports grounds; the building accommodates smaller gym rooms.

The construction period of the arena will last for 12 months and will probably start in September this year. The starting date will be decided in August.

The project would pay for itself if at least 85 events are held a year. The profitability rate of the project, according to the preliminary calculations, should be about 15 percent a year, which means that the payback period should be about 7 years, said Remmel.

According to the business plan the company should receive 2.5 million kroon profit on a 33.5 million kroon turnover.

The company’s biggest shareholder is a subsidiary of Lemminkainen, the building contractor working on the project, with a 40 percent share. Other shareholders are the city of Tallinn (20 percent), the government (20 percent), basketball association (10 percent), Estonian sports association (5 percent) and Estonian Olympic Committee (5 percent). Ownership will widen with the sale of seats.

The arena will be named “Saku Suurhall” after Saku, which has been the biggest Estonian brewery for 10 years. The new site is neighboring the Rocca al Mare trade center, which is probably one of the biggest shopping centers in the Baltics.

Source:  http://www.baltictimes.com/news/articles/269/

Tallinn nightclub in trouble

The Baltic Times, TALLINN
Aug 05, 1999
By Kairi Kurm

For three year’s one of Estonia’s biggest nightclubs, Dekoltee, has been selling discotheque tickets as theater ones, paying no value added tax. Now, as the tax department demands 6.5 million kroons ($436,000) VAT and a 3.5 million kroon fine for delay, Dekoltee may disappear from the Tallinn’s nightclub scene.

The tax department started bankruptcy proceedings against the owner of the nightclub, Noxtun, on June 22 in order to stop any possible transactions with the company’s assets. The tax department finds that the company is permanently insolvent. The first court hearing will take place on Aug. 30.

Noxtun belongs to Tal-linna Maailma Kaubanduse Keskus (69 percent) and IS Music Group, almost half of which belongs to Uhispank and the rest to Lauri Laubre and Stanislav Rubintski. According to BNS, Uhispank will not lose its investments in case of bankruptcy, because loans to the company are guaranteed with a mortgage in Uhispank’s favor.

Noxtun lately replaced Lauri Laubre with a new chairman of the board, which came as a surprise to Laubre. Laubre complained that the new management is planning to sell the company to businessman Urmas Past. According to Koit Luus, spokesman for the tax department, the change of ownership of the company is not a problem as long as assets are not moved away.

Noxtun has been selling nightclub tickets as theater tickets for three years now and Laubre is amazed, that the question of its legality rose so late.

Luus says that if a thief robs a shop five times and is not punished and is then caught on the sixth time, it does not mean that he would be left unpunished that time again. Luus said that the tax department does not have enough time to audit all the companies annually.

The IS Music Group used the same VAT trick when selling tickets for its other big nightclub in Haapsalu, Africa, from 1996 to 1997. The tax department is presently analyzing the documents of the Parnu nightclub Sunset Club.

According to Aripaev, Laubre, a major figure in the Estonian entertainment business, is planning a huge music event and construction of two new entertainment centers in Tallinn.

Meigo Pruudel, spokesman at IS Music Group, claims that the company continues its daily work as a concert organizer and if they were in financial trouble they would not have been able to organize these major events at all.

Source: http://www.baltictimes.com/news/articles/231/

Hansapank posts profit

The Baltic Times, TALLINN
Aug 05, 1999
By Kairi Kurm

Estonia’s biggest bank, Hansapank, reported a consolidated net profit of 390 million kroons ($ 26.19 million) for the first half of this year.

“Considering the macroeconomic environment, the results were respectable,” said Toomas Reisenbuk, analyst from Hansain-vestments. “It allows us to predict positive future perspectives for the bank, at least for the rest of the year.”

At the same time the Hansapank group had to increase its provisions for bad loans which had a major impact on the group’s results.

“The provisions of Han-sa Capital made a steep increase in the second quarter, which was quite a surprise for investors,” said Reisenbuk. He believes that the increasing number of leasing contracts has brought along a decrease in the quality of the leasing portfolio.

Hansa Capital had to increase loan provisions by 73 million kroons to 86 million kroons, while its net profit has dropped by 35.1 million kroons to 30.2 million kroons in the second quarter.

“But in general, the number of bad loans has not increased and the worst times are over,” said Reisenbuk.

The share of bad loans in the portfolio decreased from 1.5 percent at the beginning of the year to 0.9 percent by the end of May, he said. According to the conservative method of valuation, bad loans are loans which exceed the payment day by 60 days.

The group wrote off loans to the tune of 256.1 million kroons in the period of January through June. Hansapank’s management promised to concentrate on problem loans on the second half of the year.

The group’s second-quarter profit was smaller also due to changes of database and trademark.

The posted 390 million kroon consolidated net profit included a 233 million kroon profit from banking business in Estonia, nearly 11 million kroons from banking in Latvia, 96 million kroons from leasing and factoring, 1 million kroons from insurance and a loss of nearly 3 million kroons from banking in Lithuania.

The results also include the extra income of 49.5 million kroons from the sale of Estonian Insurance. As of June 30 the group’s total assets amounted to 30.88 billion kroons.

The release of consolidated results for the first half of the year did not bring a tangible increase in activity on the Tallinn Stock Exchange on July 28. The turnover from deals with Hansapank shares was worth 3.7 million kroons, while the share price dropped 1.5 percent to 81.5 kroons.

The international rating agency Moody’s analyzed Hansapank and decided not to change its present ratings. Hansapank has a long-term deposit rating of Baa3, a short term deposit rating of Prime 3, and a financial strength rating of D+.

Among the positive developments, Moody’s highlighted the stronger market position, changed ownership structure and high capitalization.

On the other hand Moody’s stressed the continuing weak economic climate and the fact that in a currency-board system, public institutions have very limited capabilities for providing support to financial institutions, Hansapank reported.

Source:  http://www.baltictimes.com/news/articles/220/