RIGA — The European Bank for Reconstruction and Development (EBRD) has acquired a 25 percent stake in Latvia’s troubled Parex Bank in an investment deal worth about 51.44 million lats (€84.2 million).
The EBRD’s investment in the equity capital together with a €22 million subordinated loan is aimed to strengthen the capital base of Parex Bank as well as facilitate its restructured return to the private sector.
As part of the deal officially signed off on last Thursday EBRD acquired 51,444,325 ordinary shares, with plans to purchase a further 6,062,500 shares as part of a future capital increase at Parex Bank.
The share purchase fee is equivalent to the share face value.
Parex Bank CEO Nils Melngailis is confident EBRD’s investment would enable the bank to further develop new services, in particular small and medium-sized enterprises, which he says are vital for Latvia’s economic recovery.
Parex Bank has been hard hit by the global credit crunch, with the Latvian government forced to sign off on a €284. 57 million bailout deal last November to stave off its collapse.
As part of the deal founders Valery Kargin and Viktor Krasovickis sold their 85 per cent holding in the once high-flying bank to the state for just 1 lat each.
EBRD Business Group Director Nick Tesseyman said EBRD will closely cooperate with the Parex’s management to consolidate the bank.
“The EBRD is very pleased to be able to support a bank that plays such an important role in the economy. As a shareholder, the EBRD will work closely together with management to further strengthen Parex Bank, especially in its ability to continue financing the enterprise sector,” he said.
EBRD is an international financial institution that supports projects in 30 countries from central Europe to central Asia, investing primarily in private sector clients whose needs cannot be fully met by the market.
To date the EBRD has committed close to €450 million to the Latvian economy in various projects in the financial, corporate, energy and infrastructure sectors. It also owns a minority stake in Lithuania’s Šiaulių Bank.