CFR Marfa – A Failed Privatization
After this springs failed attempt to pass the petrochemical plant Oltchim Ramnicu Valcea into private hands, the privatization of CFR Marga, the freight division of the Romanian Railway Company has also been called off,
Roxana Vasile, 15.10.2013, 12:52
The privatization of the freight division of the Romanian Railway Company, CFR Marfa, has become, by now, a never-ending story. Placed among the Government’s strategic objectives for 2013, finding a private owner for CFR Marfa was one of objectives Romania committed itself to achieving under the agreement our country signed in 2011 with the IMF and the EU, as well as under the new agreement signed this fall with the aforementioned international lenders.
The privatization was not deprived of certain hiccups, due to the low investors’ interest, but also due to numerous challenges regarding the privatization proceedings. This summer the Government sanctioned the sell-out of CFR Marfa to the Romanian Railway Group, GFR, the company that had the only valid bid in the tender. GFR was to take over an important real estate development and manage some 9,000 employees, after paying 200 million euros in exchange for the majority stake in CFR Marfa. On Monday however, the privatization committee and the Romanian Railway Group failed to reach any consensus with respect to passing the majority stake into private hands.
Businessman and GFR owner Gruia Stoica claims he was summoned by the Transport Ministry in order to be informed he could no longer pay the amount due to the state under the privatization agreement. Gruia was told he had not complied with certain provisions in the contract. Specifically, some of CFR Marfa’s creditor banks did not give their consent over the change in the shareholder structure, while the Competition Council did not have the necessary time to give a ruling over the validity of the transaction. Gruia Stoica claims the authorities had gone to a lot of trouble to convince him not to sue the state and claim damages.
Gruia Stoica: “After just 20 minutes the committee ruled that the terms of the conditional sales agreement had not been met, and they spent the following six and a half hours trying to convince us to state in writing that we wouldn’t take any legal action against the privatization committee. I will enlist 100 times in the tender to get hold of CFR Marfa if I have to”.
On the other hand, Transport Minister Ramona Manescu said the Romanian Railway Group could have paid for the majority stake, since the Ministry had done everything necessary for the transfer to run smoothly. Minister Manescu explained that, under the agreement, unless all contractual terms and conditions were met within 60 days of its having been signed, the agreement was declared null.
Ramona Manescu: “The buyer had the possibility of making the payment today, by giving up the conditional sales terms, under the contract. At present, the privatization committee, together with its consultants, is looking into the possibility for the state to hold on to the contractual collateral”.
More light will be shed on this matter only when the terms of the agreement are made public. Until then, businessman Gruia Stoica risks losing at least 10 million Euros tantamount to reparations due to him by the state, while the Government would have failed another attempt to sell CFR Marfa.
