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Sava Boss Says Banks Partly Responsible for Merkur's Problems

Ljubljana, 25 September (STA) - Janez Bohoric, the boss of conglomerate Sava, commented on the problems of Slovenia's largest hardware retailer Merkur, which affected this year's Sava business results, in an interview with Saturday's supplement of daily Delo. Banks which have transfered EUR 200m in loans from Merfin to Merkur carry part of the blame, he said.

He was referring to loans of the majority shareholder of Merkur and the vehicle used by Merkur's former managers who had carried out a management buyout in 2007.

Sava was not involved in the buyout, he reiterated. He said the company had started to cooperate with Merkur's former CEO Bine Kordez in 2006, when it had sold its subsidiary Sava Trade to Merkur in exchange for a 20% stake in Merkur worth EUR 40m.

When Merkur's managers were preparing grounds for the buyout, they invited Sava to participate in a consortium. Sava agreed, but demanded a deal allowing it to cash within a year the shares at the same price it got them plus interests. The deal would have brought Sava EUR 74m in profit, Bohoric is convinced.

But the crisis changed all that, and the so called anti-tycoon law passed at the time prevented Merfin to extend its loans taken for the management buyout. "When banks realised that Merfin's takeover of Merkur was getting complicated, they demanded from Merfin's and Merkur's managements to transfer some EUR 200m from Merfin to Merkur, which was the beginning of Merkur's problems."

Bohoric believes banks should admit their share of the responsibility for the existing situation. The transfer of the loans lowered Merkur's capital, hampered its business activities and indirectly decreased the value of its shares, which also affected Sava, he explained for Sobotna priloga.

He believes Merkur needs immediate action. Sava is ready to give up its stake in Merkur if its creditors decide so, Bohoric said, expressing hope that this would not happen and that Merkur would get back on its feet.

Sava, a conglomerate focusing on rubber production, tourism and real estate, which celebrates its 90th anniversary this year, is worth some EUR 850m today. "About a half of this, some EUR 450m are financial investments, EUR 280m is land, real estate and equipment, while the remaining EUR 120m of short-term investments are reserves and claims."

Bohoric said that even with the current problems Merkur is going through, the value of Sava's shares in the company stays at about EUR 40m.

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