First of all Mr. Ziegler there is no doubt that Konsolidacni Banka is very important for the development of the Czech economy, could you give me first a brief historical background of KOB?
Thank you for the opportunity to present KOB. KOB was established in 1991 as a state owned company with a special purpose of its existence. At the time KOB was established for one purpose and that was to transfer the so-called permanent inventory revolving loans which were granted to the companies during the past regime and which represented huge burden for this companies. At the time there were transfered the loans in amount roughly 120 billion Czech crowns ( 4 billion USD) to KOB and KOB provided this loans for the better conditions (more favorable) for the companies, also it was the first clean up of balance sheets of at the time existing Commercial banks. It was the main goal of KOB. At the time we expected just this single goal for KOB but during the time the roles of KOB were wider and wider and KOB was used for some special financial transactions for example to prepare some companies for privatisation. It was the case of Skoda cars where up to now KOB is its shareholder. Or some very structured transactions like Czech Airlines. Konsolidacni Banka was used for some cleaning up transactions or curved out transactions for Czech commercial banks and KOB also served to government as a special financial institution to solve certain issues like for example in 1996, 97 to stabilize health insurance companies to protect the health system against domino effect.
The activities of KOB are now very wide. KOB above all plays a role of a cnetralize work-out institution of bad assets in the Czech economy and we cooperate on developing and realizing of restructuring programmes in some important Czech companies KOB is also serving as a financial manager for the government towards the European Investment Bank, where we realize services for government in the area of receiving the long term loans with favorable conditions from EIB, and we use this money together with some ministries for infrastructure projects (roads buildings, reparations, etc.).
You are a Chairman, do you feel independent in your decisions or do you always have to follow the guidelines of the government?
I'll split the answer to this question into two areas: there are some decisions where we are not independent on the government. which is normally expressed in the governmental resolution, something is considered as interest of the country for example the restructuring of companies) the second area are individual business cases, where I feel to be an independent decision maker it means that there isn't any strong interference in our decision making.
It needs to be considered that KOB is the only state owned bank and of course institution with special purpose.
KOB also founded the Revitalisation agency (RA), how far is Revitalisation agency organized and what were the reasons to develop them. Was it the structure of KOB as a Revitalisation Agency?
It's a good question. The first point was how far we are now. The Revitalisation agency is now anchored as company, the decision bodies are anchored, we have staff there, there is also fixed up core management team provided by Lazard & Latona which are the RA'managers and I think the company is already deeply involved in chosen projects. Up to now we didn't transfer any assets from KOB to RA and at the time our cooperation is mainly focused on activities realized on mandate agreement between KOB and RA. It means that RA is working for KOB as advisor, as mandator for chosen cases, in some cases RA's manager is serving as advisor in the process of finding and realizing of the transaction to sell this company to strategic foreign partners.
As for the second answer, we considered RA as entity which can have large synergy of acts together with KOB, because RA is concentrated on the most complicated largest cases, very socially sensitive.
We think that RA can serve as a special body for special purpose for KOB in this whole restructuring effort, especially in the market segment of this largest most complicated cases. We think it is a good way, and this concept was positively evaluated by World bank.
The last two years were a very difficult period for the Czech economy in slower industrial growth, the banking sector with difficulties, which have been the biggest challenges you had to tackle facing those problems?
We feel that fair and effective treatment of the bad assets, bad loans in the Czech economy are the most important issues if we want to recover the Czech economy, because the concentration of bad loans or assets in the Czech economy is one of the highest world-wide. We are facing a big challenge to solve the issue of bad assets in some fast and effective way, because the volume of bad assets in our portfolio can represent 20 or 25% of total GDP, we hope that we could find and realize some concepts which can help to the economic recovery in the Czech Republic.
To be more precise you took part in two fundamental projects, like privatization of IPB and financial recovery of Ceska Sporitelna. What has been the process to achieve those two important goals?
I'll split it into two areas, one is the IPB case where KOB was just involved in one area. We took over from this bank the 'special' portion of loans, for the lodgment construction etc. with very low interest rates granted in the past regime. We took over these loans and now we administer them. That is relatively very good portion of our own portfolio because there is very predictable cash-flow, the payment ratio, larger than 95% is paid back and it is administered on the mandate agreement by IPB. It means that it was just a replacement of some assets provided by non-market conditions by IPB. So, everything what we have now joined with IPB.
Ceska Sporitelna cases are a little bit different. The rate of involvement of Konsolidacni Banka is higher. Let me summarise the steps we made. First KOB took over 3 billion of Czech crowns from Ceska Sporitelna in 1994, small portion just to stabilize Ceska Sporitelna. Then KOB took over 10.5 billion crowns of bad assets from Ceska Sporitelna in December 1998, it was also the transaction supporting the stability of Ceska Sporitelna and KOB provided the subordinated debt also for Ceska Sporitelna in amount of 5 billion Czech crowns. I must say that the transaction not so much supported the privatization but supported the stability of largest retail bank in the country. Now we are in the process of taking over the 33 billions czech crowns of bad loans from Ceska Sporitelna directly to KOB balance sheet, which is the transaction directly supporting the Ceska Sporitelna privatisation. These days we are negotiating, based on the governmental resolution, the contract concerning guarantees and ring fencing of some assets in the balance sheet of Ceska Sporitelna. It is based on an agreement between Erste Bank and Czech government where are some potential risks in the balance sheet for the Buyer and that direct support for the privatisation of Ceska Sporitelna. It is very structured transaction and the negotiations are very hard but I am convinced that privatisation will be good for the next development of Ceska Sporitelna.
| How do you see the situation of Komercni Banka ?
Yesterday government made a decision that 60 billion Czech crowns of bad assets will be transfered also to KOB, but I have to stress, not directly to KOB, but to the special subsidiary of KOB which will treat bad assets. I feel that the privatisation of Komercni banka is one of the most crucial issues for the economic recovery in this country.
As you have mentioned earlier your bank is also taking part in financial development project together with state bodies and the European Union, could you mention some infrastructure projects ?
There are the special programs for usage of this money. One of them is so called 'Czech E roads restructuring program' for improving the roads in CR, the second program is the construction of the new highways, for example highway D5 to Pilsen, Rozvadov, Germany is financed with this money. The volume of money used is over 17 billion Czech crowns, but we signed the contract with EIB and yesterday government gave the state guarantees for that, in amount of 195 million EURO's. It is a very interesting activity. Unfortunately based on the governmental resolution, by the end of this year we should transfer these activities to Czech-Moravian Development and Guarantee bank.
We had the chance to visit companies like Tatra, Zetor, Vitkovice, those companies are in a very bad financial conditions, what are you doing in order to revitalize these companies?
All these companies are involved in some restructuring programs, as far as Tatra case we are also its shareholder and we stabilize the debt structure of Tatra and now the Revitalization Agency is mandated to realize the financial restructuring and find the strategic partner for selling Tatra. I hope this process will be finished within 6 months.
Is there some foreign partner for Tatra?
Not yet. But we have some indications about the interest of certain companies.
Konsolidacni Banka still owns lot of stakes in many companies and that might be attractive to the foreign investors, so what are your relations with foreign businessmen, investors?
If you allow me, I will correct a little bit what you have just said. We are the owner of some stakes but we are also the owner of significant loans to many companies in this country. Up to now our customer base is 7 000 customers. In many cases the potential cooperation or negotiation with foreign partners could be realized not just on the base of the stakes or the equity stakes but in debt stakes, because there could be realized some debt for equity transaction. In the balance sheet of KOB is a lot of potential interesting assets for foreign partners and investors, so we try to make KOB transparent and known institution. We are in contact with Trade and Venture funds, direct investors, with special institutions abroad supporting the investment for example in Ireland.
I don't know if I'm using the right term, but KOB can be considered as being the one stop shop service for any foreign investors, an entry door for all the foreign investors coming to Czech Republic and you can provide them with lot of informations and make the process of investment more quick.
Our goal is that KOB should be considered as one of the institutions which should be contacted if somebody wants to invest in the CR. For example enquiring of some KOB assets could be evaluated as a quasi greenfield investment because in many cases the underlying assets represent it.
Our readers are always interested in new business opportunities. You as a Chairman of KOB, could you mention some really attractive investment opportunities in Czech Republic? And which are the priorities?
For example in machinery there are some companies in very good technical stand with skilled staff and many times with own research and development bases, but with very bad financial structure and balance sheet. These companies need some financial restructuring but they have a potential to be very efficient, with a high production potential.
There are also some interesting agriculture projects, lot of land which can be used. Now is the good situation for this type of investment because the prices are distressed and
macroeconomic figures show that the economic recovery will come and macroeconomic legal framework is in the process of improving for foreign investors, creditors, owners of assets.
As a more personal issue, could you give us a brief background about your professional experience?
I was appointed 11 month ago as Chairman of KOB, all my professional life I work in banking. After graduation from Economic University in Prague I worked in Czechoslovak State Bank as loan officer, I was involved in preparation of Komercni Banka at the time, and I served as a specialist for foreign currency operations. After establishing of KB I served as Deputy branch director and since 1993 I was named as Managing director in Komercni Banka headquaters and I served as Chief financial officer of KB. Since 97 I was named as Board member of Ceska Sporitelna, and 11 month now I am in KOB.
What is your biggest satisfaction here in KOB?
My biggest satisfaction is that we were able to build up a very professional and skilled team, as a combination of people from KOB with special skills, they are very precise and reliable, together with newcomers especially from commercial banking.
Secondly, I know that we were able to realize the public international tender for RA manager and that we were able to realize this RA concept and to protect that against the political interference and thirdly we were able to build KOB as a very reputable and respected institution in Czech Republic.
As a final question, what would be your message to our readers?
Not to have any fear to invest in the Czech Republic, because it is now a historical chance to invest here.
Thank you.. |
