Citadele sale will probably recoup less than expected, ex-minister admits

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The controversial sale of Citadele bank to a group of international investors will probably end up recouping less for state coffers than the €74m price tag being touted, former Economy Minister Vjačeslavs Dombrovskis said Thursday.

Speaking on the LNT TV channel, Dombrovskis said the final price was not set in stone and could still fluctuate according to the amount of the bank's equity capital and the quality of its credit portfolio.

"The sale price, the fact that €74 million is probably not the final price was also one of the main reasons why we had problems with the Privatization Agency's Board of Governors," Dombrovskis said, referring to the last-minute walkout by the Privatization Agency officials that saw replacements ferried in at high speed to replace them and sign the deal.

The sale of Citadele, a bank formed in 2010 from the wreckage of collapsed Parex Bank, has come in for heavy criticism from opposition politicians who claim the process has been hurried, the sale price is too low and that transparency regarding the precise terms of the deal has been lacking.

"The final price will depend on whether the bank's own capital will be higher or lower than what was expected. The greater likelihood is this correction [to the final selling price] will be negative," said Dombrovskis, who admitted the way the bank had been disposed of was less than ideal, with the government scrambling to achieve a sale before a European Commission deadline, thus reducing chances to interest other potential buyers, which would have helped in efforts to negotiate a higher price.

"That plan fell apart on July 31, when the government took the decision to start exclusive talks with one particular investor... the government voted and it was the opinion of the majority. I assume that there were geopolitical aspects [why US investors were chosen], "Dombrovskis said, revealing that other potential buyers for Citadele had included billionnaire businessman Yuri Scheffler's SPI Group (which produces the famous Stolichnaya vodka in Latvia) and Moscow's Expobank.

"We realized that from a geopolitical point of view, regarding the conflict in Ukraine, we faced a difficult situation," he said.

The Latvian Privatization Agency on November 5 confirmed that the sale contract for the 75% state-owned stock in commercial bank Citadele had been signed, thus transferring ownership to an investor group that includes Ripplewood Advisors and retains the European Bank for Reconstruction and Development (EBRD) holding its 25% share.

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