LM Legal Services Blog

The investment funds will be able to buy properties on territory of EU-member-states, according to the draft amendments of the law for the investment funds suggested by the Committee for Financial Supervision. Until now these funds could invest only in Bulgaria. The other significant amendment is that the minimal capital will increase from 600 000 levs to 1 million levs. The funds will be able to cooperate and work together on large property project which they would not be able to do on their own. The requirement that the depository bank which holds the money of the fund should give credits to them shall be removed. Other amendments include the possibility for investment in bonds and futures issued with the aim to finance major infrastructural projects. The requirement to obligatory increase the initial capital in order to get the right to operate as a fund will be also removed.

The rules for terminating the license of the company. The fund will be able to request it and in such case it will continue to operate as a normal company not as an investment fund.

Russians buy hotels on the Bulgarian Black Sea cost for peanuts. They hire estate agents to look for cheap property, mainly hotel owners who are on the verge of bankruptcy or developers who cannot complete their projects. They also buy already developed projects for holiday resorts which have been denied financing from banks. About ten very good purchases at attractive prices have been completed since the beginning of the year. Most of them are for about 500 Euros per sq m. The jewel in the crown is a four story hotel in Svety Vlas the area of which exceeded 1000 sq m. The hotel sold for 300 000 Euros. The Russians invest their money in Bulgaria in order to save them, as the trust in the Russian banks have sharply decreased over the last six months.

The Bulgarian banks – First Investment Bank, Central Cooperative Bank, Corporative Trade Bank – have increased their incomes by 15%, reaching 338.7 million levs, due to increasing their interest rates. The net profit of these banks for 2008 was 166.7 million levs, an increase by 13% in comparison with 2007. The increase of taxes and fees have led to the increase of their income by 12 million levs. However, their expenses have also increased to 2890 million levs from 236 million levs in the previous year.

According to analysts there are no indication for crisis in the banking sectior. The growth of the Bulgarian banks come to prove that they have not been affected dramatically by the recession.
Most of the analysts think that there will be no economic catastrophy and the private business will be able to repay bank loans.

The maximal new foreign debt of Bulgaria in 2009 will be increased by 25% or 2.5 billion levs (about 1.2 billion Euros) according to the decision of the parliamentary budget and finance committee. The council of Ministers will not make any changes in the credit framework during the year as the loans and the beneficiaries have been already chosen. The largest loan is of 600 million Euros and it is for the construction of the nuclear power station Belene.

Bulgaria lost 220 million Euros with the decision of the European commission not to resume the accreditation of the two PHARE agencies in the country which has been taken in July of this year. The two agencies, one at the finance ministry, the other at the regional development ministry, have been administration 560 million Euros coming from the EU, of which 340 million Euros have already been allocated. The rest – 220 million Euros – had to be contracted in November 2008 but have been frozen and can not be used now.

The reason for this is that according to the European Commission, the measure which Bulgaria introduced in the last six months have been only promises and there have not been any concrete results. The problems linked to corruption, the application of law, the conflict of interest, the qualification and the number of the employees in administration and the management of the funds. This decision of the European Commission aims to protected the interests of all European citizens, including the Bulgarians, said Kristina Nagy, the speakeswoman of the European Commission. This action against an EU member state is without precedent in EU history. The aid that has been canceled or frozen is for farmers, road-building and other infrastructure projects.