At the beginning of February, the alarming information spread in the media that between First Investment Bank /FIB/ and collection company S.G. Group a „war“ broke out because of non-performing debts for about 300 million BGN. The beginning of their relationship dates back to 2019, when the bank was under pressure to clean up its balance sheet in order to prepare for an asset quality review and stress test by the European Central Bank (ECB). Among the main operations through which the capital shortfall shrinks to manageable levels is precisely through a deal with the collection company.
So, in December 2019, FIB subscribed to a bond issue for BGN 236 million from S.G. Group, which a few days later was fully used by it to acquire a package of non-performing loans from the bank. Their nominal value is BGN 538 million, but usually in such old portfolios it is difficult to collect a large part of the principal and therefore their sales occur at around 5-10% of the nominal value, “Kapital” explained. The problems started at the end of last year, and it is currently unclear what is at the root of the conflict. They arose when the 4-year grace period on the bonds expired – in December 2023, the collection company had to transfer for the first time not only the annual interest /BGN 11.8 million /, but also BGN 30 million as principal. At that time, the bond loan had been repaid.
From the outset, expectations to recover more than 50 percent of the value of the bank’s old bad loan portfolio in order to pay off the bond with interest have seemed unrealistic. It is believed that there were negotiations to seek a solution to restructure and reschedule the loan, but it is not clear how they went.
3 months before the bankruptcy filings, the first signs that something is afoot have appeared. On October 5, 2023 Innovative Finance Holding issued a decision according to which the headquarters of S.G. Group was moved from Sofia to 47A Otets Paisiy Street in Pernik, where Money+ has its office. Ten days after that, a general meeting of shareholders of Innovative Finance Holding followed, at which it was decided to rechristen the company as Gold Project Holding and the ultimate owners, who were also directors until then, left its management.
FIB’s first actions were also recorded in December last year when it proceeded to foreclose its liens on the trading companies of Silver Project and Sea Property and appointed a depositary and manager in both companies. Towards the end of the month, the bank also obtained a writ of execution against another related company, Corporate Collections Company, which is a co-borrower on a loan to Pay Plus. However, the amounts claimed there are relatively small /about BGN 300 000/ and the attachments imposed by the PSI on shares in subsidiaries were quickly lifted.
FIB’s next move is from January 5, when it files applications in the Sofia City Court to declare Financial Investment Company and Silver Project bankrupt. In the middle of the month, the Sofia City Court scheduled the two cases for consideration. The FIK meeting has been announced for February 6, and that for Silver Project – for February 20, and for both, experts have been appointed to present accounting expertise.
Worried about what is happening and asking them to fully explain the case, on 6 February we sent some questions to FIB. We asked them to answer the following questions:
- What is the amount of S.G. Group’s liabilities to FIB?
- Is there a danger that FIB will go bankrupt because of this debt if it is not paid?
- Is there a danger to FIB’s customers and depositors and will their interests be affected if this debt is not repaid by the company?
- Who will cover FIB’s losses if the debt is not repaid?
- Will FIB’s losses force the bank to raise some fees on consumers to cover its losses?
Initially, our questions were sent to pr@fibank.bg – an email listed as the bank’s official media outlet. After not receiving a response by February 26, we also sent our questions to the bank’s customer email addresses. At the time of writing, we still have no response from the FIB. In addition to these questions, we publicly would like to ask:
- What is the reason that the FIB did not respond to our inquiry?
- Is it possible that the reason for this lies in the danger that the bank will go bankrupt and, accordingly, that its customers will be affected?
However, a media report showed us that some kind of agreement was reached between FIB and S.G. Group. The bank has published a letter addressed to the Financial Supervision Commission and the Bulgarian Stock Exchange /which has not been sent to our editorial office/, which it says:
„Dear Sirs,
Regarding the media interest, we would like to inform you that as a result of the measures taken, an agreement has been reached between First Investment Bank JSC and S.G. Group.
The agreement ensures that the obligations to the Bank will be fulfilled.“
The document was signed by the CEO of PIB Nikola Bakalov and the executive director Svetozar Popov. Shortly after it became clear about him, the bank’s shares on the Bulgarian Stock Exchange registered a 23 percent increase. Restructuring the loan means that FIB will have to charge provisions on it, but much less compared to the hypothesis that there is a debtor in bankruptcy. The Iskra.bg team reserves the right to an answer, from which it will be categorically clear whether there is any risk for the bank’s customers.
