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PDP Discussing Capital Raising with IFC, EBRD (interview)

Ljubljana, 23 August (STA) - The state-owned PDP asset management firm, whose portfolio of investments includes those in troubled flag carrier Adria Airways and bankrupt builder Vegrad, is discussing a capital increase with international institutions such as the IFC and EBRD, PDP executive director Matej Golob Matzele has told an interview with the STA.

Asked whether the PDP had justified its existence in little more than two years of operation, Matzele said this was "a matter of perception".

The PDP took over state stakes in ten companies as part of a process of their restructuring and eventual privatisation in December 2009. The stakes held by the Pension Fund Management (KAD), Restitution Fund (SOD) and investment firm DSU in the troubled companies were handed to the PDP in a bid to restructure them and sell them.

With the transactions the PDP became the owner of 88% of Adria Airways, 33% of coatings maker Aero, 66% of sports equipment manufacturer Elan, 70% of electronics company Elektrooptika, 70% of electronics company Fotona, 21% of furniture company Novoles, 71% of paper producer Paloma, 16% of spa operator Rimske terme, 45% of Unior and 29% of Vegrad.

"We have introduced quite a few changes in the management of companies and their supervision. If nothing else, as a company in direct state ownership we are significantly better acquainted with the situation at individual companies than anyone has ever been so far."

On the other hand, one could pinpoint Vegrad and Novoles, which are in receivership, or Adria Airways, which needs a bailout from the state, Matzele said.

After the depreciation of investments in Adria, Novoles, Paloma and Vegrad, the PDP recorded a loss of EUR 28m last year, while at the group level the figure was EUR 63m. This year the firm plans to sell off some of its stakes.

Proceedings to sell Aero are currently under way and a strategic partner is being sought to invest in Elan; the sale of Fotona is also planned, Matzele explained.

"We knew we'd be writing off Novoles and Vegrad because of the condition the companies were in. We have also written off the entire investment in Adria Airways and a lot of it in Paloma," the PDP boss said, adding that Paloma and Adria had been valued too optimistically.

Matzele believes Adria needs the EUR 50m capital increase envisaged in the supplementary budget, which the government confirmed last month.

However, the company's existence also depends on the conversion of banks' claims into ownership shares. Talks with the banks will continue until the shareholders meeting on 31 August and there are good arguments for them to take part in the conversion, Matzele said, adding that the banks responded "extremely well" to the plan.

"The plan envisages that banks immediately get half of the claims which would not be converted, that is a quarter of all claims, in the amount of EUR 19.2m, from the EUR 50m state-sponsored capital increase."

The share that would be converted into capital may not be worth much at the moment, but its value might increase in the coming years, Matzele said, adding that this was better option for the banks than Adria's bankruptcy.

According to him, the PDP supports the proposal that a public call for applications is published by next March at the latest to find a strategic partner for Adria.

Commenting on the search for an investor into Elan, Matzele said that it would be best for Elan to get private owners. "We think the moment is right and there are plenty of good investors out there for which Elan is an interesting investment."

Asked whether Paloma, where the PDP could not find common ground with the investor, could repeat with Elan, Matzele said that Paloma had been in a more difficult position and the interest of investors had been scarcer.

In Paloma's case the PDP wanted to prevent investors from only taking over the brand and shut the company down, he explained, adding that Elan was also to stay a company with its own brand name and headquarters in Begunje.

Apart from selling its stakes, the PDP is also considering entering new companies, also at the request of their owners. "This year, we analysed five or six companies...The best known company where we examined the possibilities was the TVM...but unfortunately we found no economic reasons to enter it."

The PDP's entry into new companies is limited and depends on the funds in form of the firm's investments. "This is why we are trying to find an investor, which would provide fresh capital to the PDP to enable us to enter new companies."

Elaborating on this, Matzele said the PDP was discussing a capital increase with specific investors, including the International Finance Corporation (IFC) of the World Bank and the European Bank for Reconstruction and Development (EBRD). The initiative came from PDP's owners, he added.

Asked whether the PDP was offering a majority stake to these investors, Matzele said this depended on the investor and their interests.

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