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Ministry Drafts KAD, SOD Transformation Bill

Ljubljana, 24 February (STA) - The Finance Ministry released a draft version of the bill on the transformation of the state-owned KAD and SOD funds on its website Wednesday, as it seeks the opinion of the public on the document required as part of Slovenia's preparations to join the OECD.

Under the proposal, the two state-run funds will be transformed into fund managers and will have to sell off a large chunk of their investments.

The role of the Pension Fund Management (KAD) and Restitution Fund (SOD) will be that of portfolio investors, with both being limited to stakes of 5% (voting or share capital) in companies.

As part of the transformation, a pension insurance company will be created by spinning off the insurance part of KAD. The new pension insurance company will operate all the pension and disability funds currently managed by KAD.

KAD will be the owner of the insurance company, although it will have to sell a stake of at least 25% to the state and another stake to the trade unions, who represent the clients.

In order to finance the pension purse, KAD will have to take out a EUR 900m bond issue with a coupon rate of 4.95%.

As part of the transformation of SOD into a portfolio investor, the DSU fund, which manages various state interests in real estate and a number of companies, will be integrated into the new fund management company.

SOD will use the assets obtained from DSU related to privatisation and denationalisation to pay out denationalisation claimants, while DSU operations will be limited to real estate management.

Both KAD and SOD will have to offload stakes in Slovenian companies and abide by rules that apply to fund managers.

Facing a 5% ownership cap in companies, the two funds will relinquish their current role as proxies in managing what are essentially state assets.

To meet the new rules, the funds will have to sell stakes they currently hold in a number of Slovenian companies within a three-year period. Many of these stakes will be transferred to the state.

As part of the envisaged restructuring, shares in the bank NLB (10.6%), insurance company Zavarovalnica Triglav (26.3%) and port operator Luka Koper (16%) will be transferred to state ownership as of 1 January 2011. The value of these assets is estimated at EUR 340m.

Moreover, the funds will have to transfer stakes in the NKBM bank (9.6%), airport operator Aerodrom Ljubljana (21.3%), telco Telekom Slovenije (19.8%), energy group Petrol (28%), drug maker Krka (24.9%) and reinsurer Pozavarovalnica Sava (25.01%), worth an estimated EUR 1bn, within two years.

The government will have a preemptive right to acquire these stakes, but if it should wave that right, KAD and SOD will be able to find suitable buyers for them.

As part of the transfer of stakes to the state, an audit will be carried out to establish their latest value.

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