Romania's $840mn Petrom sale fails

The sale victim to a dwindling appetite for risk for unfamiliar assets amid growing worries over debt in the United States and euro zone.

Led by Poland and Russia, emerging Europe is seeking to sell state assets to boost public finances, attract investment and inject foreign expertise into moribund local industries. But Romania has lagged until now for fear of causing job losses.

The deal, through which the government hoped to raise $840 million, was a key test of commitment to sell stakes in more companies in what would have been the largest ever on Romania's fledging capital market.

However Romania's International Monetary Fund representative said the failure of the deal would not affect its current 5 billion euro aid deal.

"The transaction was difficult to achieve in these challenging market conditions, which deteriorated further during the marketing period," said John Porter, head of financing at Renaissance Capital, which advised on the sale.

"Investors' risk appetite towards an equity market they are not familiar with is limited."

Romania is stuck with a slew of inefficient companies on its balance sheet, draining hundreds of millions of euros a year, as buyers start to balk at asking prices because of a tougher global economic outlook.

The government said it would monitor markets before deciding when to re-launch the sale.

"It would have been much better to extend the offer period, or even, adjust the price," said Guy Burrow, a partner at consultancy Condole in Bucharest.

"That would have been given market confidence that even in difficult market conditions, Romanian authorities are determined to continue with privatisations," he said. "This is not an inspired move. There are never 'ideal market conditions' it's about price."

The government committed to a raft of privatisations as part of a 5 billion euro IMF-led aid deal and analysts had expected Petrom the first on the block to be one of the easiest to sell.

The offer period for the 9.8 percent stake ran over the past two weeks and expired at 0900 GMT on Friday.

Other privatisations include the sale of 15 percent stakes in two more energy companies, Transelectrica and Transgaz, planned for later this year.

Romania's leu fell against the euro after the news and traded flat on the day, erasing earlier gains posted after a euro zone agreement on a second bailout for Greece.

The government had targeted 0.46 lei per share, which would have raised some $840 million, and set a minimum price of 0.3708. Petrom shares closed 1.9 percent lower at 0.3762 on Friday.

Austria's OMV holds a majority in Petrom and the government has 21 percent. The sale was managed by Renaissance Capital, EFG Securities, BT Securities and Romcapital.

Copyright Reuters, 2011