Market pros assign treasury wishful deadline
Otherwise, say banking professionals, it will once again be relegated to the back burner of the country's embarrassingly slow privatization process.
The sell-off of the state-owned bank is the cornerstone of the nation's ambitious privatization strategy. The treasury's 2004 scheme pledges to place over 200 companies into private hands and yield as much as zł.8.8 billion (€1.8 billion) for the country's over-burdened budget. But potential buyers and interested bankers remember the negative precedent of last year's embarrassing privatization shortfall, and take a now-or-never approach to their ad hoc advice for PKO.
"Theoretically this is possible - if they select an adviser this month," says a banker pitching to the treasury for a PKO sale, something that has been canceled many times before.
On the other hand, the banker says that if the ministry were to postpone adviser selection beyond this month any sale will miss Treasury Ministry Zbigniew Kaniewski's recently announced 2004 time-frame.
For a deal of this size, investment bankers require time for due diligence and to road-show the asset nationally and internationally. The further into the Spring the treasury waits, the less time deal-makers will have to put together an acceptable transaction. The bank is also one of the more impressive assets on the blocks, especially given its record zł.1.23 billion net profit last year.
At least the government is paying lip service to the idea of a sell-off - whether or not it's an initial public offering.
"If you look at what they're saying now," the banker says, "then clearly there's political will. But past practice does not support this."
Marcin Materna, banking analyst at Bank Millennium, agrees.
He explains that investment banks need to put in many hours before being able to transact a deal of this magnitude - especially as the government has proven it's loathe to sell off any of its assets at just any price. This is why Materna is not so optimistic, and he figures it's more likely that privatization will be pushed back to next year when general elections will further exacerbate the government's reluctance.
"I really don't believe that they will have enough time to complete the sale," he says, commenting on a deadline for later in the year. "The treasury knows that if they speed up the process they will get less money for it."
What's more, market watchers point out that any deal-worthy investment bank will insist on taking its time in bringing to market what is expected to be 30 percent of PKO.
"I think [the government] will wait for more money," he says. "I don't think this year."
Besides valuation issues, the ministry has a glaring record of missing last year's zł.9.7 billion privatization target by zł.5.1 billion - after cutting the estimate five times over the year. Thus, Kaniewski fails to move markets whenever he deigns it time to give the public a heads-up on the ministry's plans. Last week, for instance, he augmented the government's accepted list of to-be-sold enterprises.
Should the government want to finally make good on its promises, Materna entertains a scenario that has it selling off a much smaller piece of PKO this year to a financial investor, rather than in the public equity market. Such a move would free up capital for the budget, he says.
However, advisers who have been scouting out this potential deal for years are not expecting it to see the light this year. While transacting multi-billion złoty bond deals via the ministry of finance is a lucrative and steady business for some of the world's most prominent investment banks, the business relationship with the treasury has been precarious by comparison.
To count on advisory work from the treasury as a reliable component of a business plan is "too risky", says the banker. The process is riddled with problems.
Earlier in the year, the treasury even caused the management board at PKO to attempt to step in and push the deal to market on its own. It is unknown whether this will come to fruition.
At present, the PKO advisory competition includes four big-name firms: Citigroup Global Markets, Credit Suisse First Boston, HSBC and Deutsche Bank Securities.
The sell-off of the state-owned bank is the cornerstone of the nation's ambitious privatization strategy. The treasury's 2004 scheme pledges to place over 200 companies into private hands and yield as much as zł.8.8 billion (€1.8 billion) for the country's over-burdened budget. But potential buyers and interested bankers remember the negative precedent of last year's embarrassing privatization shortfall, and take a now-or-never approach to their ad hoc advice for PKO.
"Theoretically this is possible - if they select an adviser this month," says a banker pitching to the treasury for a PKO sale, something that has been canceled many times before.
On the other hand, the banker says that if the ministry were to postpone adviser selection beyond this month any sale will miss Treasury Ministry Zbigniew Kaniewski's recently announced 2004 time-frame.
For a deal of this size, investment bankers require time for due diligence and to road-show the asset nationally and internationally. The further into the Spring the treasury waits, the less time deal-makers will have to put together an acceptable transaction. The bank is also one of the more impressive assets on the blocks, especially given its record zł.1.23 billion net profit last year.
At least the government is paying lip service to the idea of a sell-off - whether or not it's an initial public offering.
"If you look at what they're saying now," the banker says, "then clearly there's political will. But past practice does not support this."
Marcin Materna, banking analyst at Bank Millennium, agrees.
He explains that investment banks need to put in many hours before being able to transact a deal of this magnitude - especially as the government has proven it's loathe to sell off any of its assets at just any price. This is why Materna is not so optimistic, and he figures it's more likely that privatization will be pushed back to next year when general elections will further exacerbate the government's reluctance.
"I really don't believe that they will have enough time to complete the sale," he says, commenting on a deadline for later in the year. "The treasury knows that if they speed up the process they will get less money for it."
What's more, market watchers point out that any deal-worthy investment bank will insist on taking its time in bringing to market what is expected to be 30 percent of PKO.
"I think [the government] will wait for more money," he says. "I don't think this year."
Besides valuation issues, the ministry has a glaring record of missing last year's zł.9.7 billion privatization target by zł.5.1 billion - after cutting the estimate five times over the year. Thus, Kaniewski fails to move markets whenever he deigns it time to give the public a heads-up on the ministry's plans. Last week, for instance, he augmented the government's accepted list of to-be-sold enterprises.
Should the government want to finally make good on its promises, Materna entertains a scenario that has it selling off a much smaller piece of PKO this year to a financial investor, rather than in the public equity market. Such a move would free up capital for the budget, he says.
However, advisers who have been scouting out this potential deal for years are not expecting it to see the light this year. While transacting multi-billion złoty bond deals via the ministry of finance is a lucrative and steady business for some of the world's most prominent investment banks, the business relationship with the treasury has been precarious by comparison.
To count on advisory work from the treasury as a reliable component of a business plan is "too risky", says the banker. The process is riddled with problems.
Earlier in the year, the treasury even caused the management board at PKO to attempt to step in and push the deal to market on its own. It is unknown whether this will come to fruition.
At present, the PKO advisory competition includes four big-name firms: Citigroup Global Markets, Credit Suisse First Boston, HSBC and Deutsche Bank Securities.
