The loan arrangement by the OTP bank on the sale-purchase of shares of Croatia's food-maker Podravka is a normal market transaction which the Hungarian bank entered under favourable conditions, the bank's executives said at a news conference they held for Croatian reporters in Budapest on Thursday.
OTP Deputy Director-General Laszlo Wolf said the Merrill Lynch had been included in the financing of the acquisition of 10.64 per cent of Podravka shares by Fima Amy, a Croatian financial company, in 2007.
The loan was arranged for three years and the security offered for the deal were Podravka shares.
Wolf recalled that the entire arrangement had been tied to the price of Podravka shares and that following the plummeting of their price in 2009, the loan was left without security, which prompted Merrill Lynch to think about selling the shares to international investors.
Wolf said this posed a risk of a considerable part of Podravka stock going into the hands of foreign investors.
After that, the Fima company asked the Hungarian OTP bank to replace Merrill Lynch in the loan arrangement, with Podravka shares left to serve as loan security.
In the event of Fima's failure to service the loan in an orderly manner, OTP can acquire Podravka shares, according to Wolf.
The loan's principal is EUR 35.55 million, and the interest is EUR 1.16 million, which means that at the moment OTP's claims in this deal are EUR 36.71 million.
The market value of the relevant package of Podravka shares was EUR 26.47 million on 16 March, and the sum of EUR 32.80 million was covered with additional security collateral.
Podravka was obliged to pay the differences between the market value of shares and the real amount of the loan.
So far, Podravka has paid EUR 6.32 million as a cash advance and is expected to pay an additional EUR 3.91 million of the claims by the end of March, according to Wolf.
"OTP replaced Merrill Lynch in the transaction and nothing else changed," OTP Director-General Sandor Csanyi said.
In case of non-orderly payment of the loan, OTP can sell Podravka shares on the market and there is also an option of selling those shares back to Podravka, Csanyi said.
He said that he did not know any individual who had an interest in Fima or Podravka and that he knew nothing about possible connections between those two Croatian companies.
Csanyi said he had never met former Croatian Prime Minister Ivo Sanader or Podravka executives and that the transaction had been arranged with the supervision of international auditors.
He announced a meeting between OTP and Podravka executives later this month, and added that the Podravka management had been acquainted with the contents of the arrangement between Merrill Lynch, OTP and Fima.
In response to questions about who requested the replacement of Merrill Lynch by OTP in the transaction, Csanyi said that it was Fima, but did not reveal the identity of the responsible individual from Fima.
The role of Hungary's MOL remains unclear. This oil and gas group acts as surety for the implementation of the transaction, however, the OTP executives did not explain in which manner this Hungarian company would perform that role.
Asked whether shares of Croatia's INA company were an option as surety for the loan, the OTP representatives said that there was no mention of INA shares in the loan agreement, but that the document did not rule out this possibility, given that INA shares could be bought on the market.
Asked whether anybody from the Croatian leadership or the Croatian Interior Ministry had contacted the OTP management, the bank officials said that they had delivered the documentation and that the OTP management was ready to cooperate with the Croatians.
The bank management said that the OTP group's net profit fell in 2009 by 30 per cent from 2008, to EUR 536 million.
The OTP bank in Croatia registered a profit of HRK 85 million in 2009 as against HRK 145 million in 2008.
