The Czech HN business daily reports today that Societe Generale will push for a lowering of the price at which it will buy the 60% KB stake it won in a privatization tender. The government sold the stake for CZK 40 bil. (CZK 1,754 per share), but SG wants to reduce this price by CZK 2 bil. (the resulting CZK 38 bil. would amount to CZK 1,666 per share). The sale agreement allows for an adjustment of the price by +/- CZK 2 bil., so such a reduction is plausible. The key issue is KB’s CZK 17 bil. investment in CDOs (collateralized debt obligations); the speculation has been for some time that the deterioration of the US economy may necessitate additional provisioning against potential losses from the CDOs (the negative impact of such possible provisioning is, in our view, far more important than a reduction in SG’s purchase price). The Czech central bank has been investigating the issue too, and its report will be submitted to KB’s supervisory board today. Subject to its investigation has been also KB’s holding of majority stakes in Ceska zbrojovka and Vodni stavby, which violates the banking law, according to HN. Although the issue of KB’s CDOs has been present for some time, news such as the above may damage the stock.
(Ondrej Datka)