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MoF ACTIVATES GOVERNMENT GUARANTEE FOR PRINCIPAL DUE BY BDZ HOLDING UNDER IBRD LOAN

22.12.2011

The Ministry of Finance has ordered a principal payment of EUR 2.97 million under a government guaranteed loan for the financing of the Railway Recovery Project granted by the International Bank for Reconstruction and Development due by the borrower BDZ Holding EAD. The maturity fell on 15 December 2011 but the payment was not made by the borrowing company due to its deteriorated financial status. According to the Guarantee Agreement, the Ministry of Finance represents the Republic of Bulgaria in its capacity of loan guarantor.

The decision of the Ministry of Finance to activate the government guarantee to the amount of the principal due by BDZ Holding EAD is conditioned by both the Government\'s willingness to support the reforms in the company and by the extremely important circumstance that in the event of any default payment under the government guaranteed loan, IBRD may suspend immediately the absorption of any active country loans.

 

The Ministry of Finance recalls that the loan was extended by virtue of an Agreement between BDZ and the International Bank for Reconstruction and Development signed in 1995 to the amount of USD 95 million. The government guarantee was extended by virtue of a Guarantee Agreement (Railway Recovery Project) between the Republic of Bulgaria and IBRD ratified by law promulgated in issue 12 of the State Gazette of 1996. The project was implemented in the period 1996-2002, with about USD 51.93 million and EUR 27.83 million having been drawn thereunder as of the final date of fund absorption (30.06.2002). The loan was contracted for a 20-year period of repayment including a 5-year grace period, and is repaid on 15 June and 15 December of every year. The final maturity falls on 15 June 2015.

 

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