Citigroup to handle potential asset sales over EUR 500 mln in Property Fund

Franklin Templeton, sole manager of the Property Fund (FP), has appointed US investment bank Citigroup as intermediary for a possible sale, transfer or disposition of stakes in Romanian power and gas companies that are not listed on the stock exchange.

FP has minority stakes in these companies (E.ON, Enel, Electrica, GDF Suez), which are distributors and suppliers of power and gas, representing 15 percent of FP’s net asset value, totaling EUR 527.6 million.

Citigroup is also part of the intermediary consortium that bid for the IPO of state-owned Hidroelectrica, Romania’s largest power generator.

“The mandate given to Citigroup is in line with one of our key objectives to reduce the share of the unlisted part of FP’s portfolio. Through this action we hope to create additional value for our shareholders,” said Greg Konieczny, fund manager of Property Fund.

This February, US based Elliott Associates hedge fund that holds a 13.9 percent of the paid hare capital of FP, called a shareholders meeting to ask Franklin Templeton to start selling assets in FP’s portfolio allowing shareholders to cash in the funds. The hedge funds said selling assets would guarantee the fund managers an additional fee worth 1.5 percent of the sums distributed to shareholders through to 2013, falling to 1 percent in 2014. At present, the fund manager is paid a quarterly fee of 0.47 percent of its market capitalization which stood at EUR 1.6 billion at end-January.

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FP had 46.7 percent foreign institutional shareholders while 32.4 percent were Romanian private individuals at end-February 2012. Another 10 percent are Romanian institutional shareholders.

The largest shareholders in FP as of January 13 are Elliott group of companies which hold a 13.9 percent stake, followed by City of London with 7.2 percent and Palade van Dusen Georgia (heir of Industrialist Max Auschnitt) with 6.5 percent.

The FP’s net asset value (NAV) totaled EUR 3.48 billion at end-January which includes stakes in 73 companies, out of which only 27 are listed on the BSE, with a market capitalization of EUR 1.6 billion on the stock exchange.

FP shares are currently traded at a discount of 46.9 percent.

Net profit FP increased by 20 percent y/y to EUR 128 million in 2011.

FP was launched in December 2005 to compensate Romanians whose properties were confiscated by the former communist government. Franklin Templeton became sole manager of the fund in September 2010.

Ovidiu Posirca