A DECISION THAT ISN'T JUST INEXPLICABLY BAD The investment of SIF Banat Crişana in Blue Air bonds has violated the norms of the ASF

MAKE (Translated by Cosmin Ghidoveanu)
English Section / 19 august 2020

The investment of SIF Banat Crişana in Blue Air bonds has violated the norms of the ASF
MAKE (Translated by Cosmin Ghidoveanu)

The loss of 9.3 million Euros which SIF Banat Crişana concealed from investors in the Net Asset Value Report for July reported to the BSE was the amount paid last year for the Blue Air Aviation S.A. bonds (9 million Euros, date of purchase: December 16th, 2019; maturity date: June 15, 2020; annualized date: about 13%).

According to another Communique (signed by Bogdan Drăgoi) to the BSE (June 16), "The acquisition of bonds issued by Blue Air Aviation S.A. follows the prudential limits set via existing regulations and is part of the investment policy of SIF Banat-Crişana to support Romanian companies."

What Bogdan Dragoi states is not true.

The purchase of bonds issued by Blue Air Aviation S.A. does not abide by the legislation which applies to SIF Banat Crişana.

First of all, the investment in anything - bonds or stocks - must absolutely be done through an entity that operates within the legal framework, but Blue Air Aviation operates on the edge of the law and has been in danger of being dissolved at any time, for the last three years.

It was already in danger of being dissolved at the time when SIF Banat Crişana bought its bonds.

Blue Air, in which SIF Banat bought bonds, could be dissolved at any time at the request of a shareholder

As can be seen from the analysis, the NAV of Blue Air Aviation SA, "when calculated as the difference between the total assets and total liabilities, has been reduced to less than half of the value of the subscribed share capital".

My quote comes from the Law 31/1990 and contains an involuntary irony, because in 2016, for instance, the NAV of Blue Air Aviation SA was not only lower than half of its share capital, but instead reached -113.5 million, compared to a share capital of 1000 lei; in 2017 to -263.4 million, compared to 1000 lei share capital; in 2018 to -446.2 million, compared to 90,000 share capital; and in 2019 to -373.1 million, compared to 1,000,000 share capital(!)

It is unclear how much longer Blue Air will function, because, since back in 2017, according to the Law no. 31/1990, Article 153 24 (See NOTE 1 - the passage from the law quoted beneath the article), shareholders should have dissolved the company or reduced its share capital by an amount at least equal to the losses that couldn't be covered from the reserves; of course, the shareholders could have recapitalized the company to the extent required by the law.

But the shareholders of Blue Air did not do anything of the kind.

Not in 2016, nor in 2017, nor in 2018, nor in 2019.

According to the law, upon the request of any interested shareholder, Blue Air can be dissolved.

The decision of investing in bonds of such an issuer is inexplicably bad, representing a risk of default of nearly 100%, as well as the risk of the company disappearing.

Still, the manager of SIF Banat Crişana has made the investment.

The financial disaster at Blue Air predates the pandemic

For Blue Air Aviation SA, the paralyzing consequences of the pandemic have created aggravated circumstances, but they are not the cause of the disaster there, as Bogdan Drăgoi manipulatively claims in the Communique to the BSE of June 16 (See NOTE 2 - Communique, below the article).

Blue Air has to repay about 20 million Euros to its shareholders, the equivalent of the tickets bought for the March - June period, when it didn't fly.

Over the same period, it had losses of 100 million Euros.

That doubles the debts it had at the end of last year, probably taking them at over 250 million Euros, at the present time.

In a communique, the company claims that in the next year and a half it will generate sufficient revenue for the payment of debts - let's cautiously admire its optimism.

In April, the Government approved a loan of 65 million Euros for Blue Air, in order to cover the losses generated by the pandemic.

But Blue Air needs a lot more...

SIF Banat Crişana threw nine million Euros at Blue Air out of the money of its own investors; the government is throwing 65 million Euros at Blue Air out of the taxpayers' money.

Will the investors of SIF Banat Crişana get their money back from taxpayers?

Or even that won't work?

The manager of SIF Banat Crişana has violated the provisions of ASF regulation no. 9/2014

According to Art. 177 1, letter d) of the Regulation no. 9/2014 (See NOTE 3 in the footer), which SIF Banat Crişana constantly claims it abides by, in order to invest in Blue Air bonds, Blue Air should have been profitable over the course of the last three consecutive fiscal years.

That is not the case.

In the three years prior to the one where SIF Banat Crişana bought its bonds, Blue Air had only losses: -121,804,041 lei in 2016; -149,884,955 lei in 2017; -145,594,276 lei in 2018.

Are ASF regulations a joke?

Does the ASF take its Regulations seriously?

But in general, does the ASF really watch the market or is it just hunting for bribes?

Does the bonds issue made by Blue Air really exist?

On October 29, 2019, BURSA reported: "Blue Air wants to issue and list on the BSE bonds worth 50-60 million Euros, an operation which could begin in autumn next year, according to a statement made by the company's management, yesterday, in a reduced meeting with the press."

Still, the issue of bonds acquired by SIF Banat Crişana took place in the autumn of 2019, approximately eight-nine months earlier than the management said and out of the blue.

Google has no results when searching for the prospectus for the bonds issue by Blue Air Aviation S.A."

This bonds issue, did it really take place?

Wasn't it actually just a blind loan?!


Law 31/1990

Article 153 24

(1) If the board of directors, respectively the directorate, finds that, as a result of losses, established by the annual financial statements approved according to law, the net assets of the company, determined as the difference between total assets and total liabilities, have decreased to less than half of the value of the subscribed share capital, will immediately convene the extraordinary general meeting to decide whether the company should be dissolved.

(2) The articles of incorporation can establish that the extraordinary general shareholder meeting can be summoned even if the decrease of the net assets is less significant than that stipulated in paragraph (1), establishing that minimum level of the net assets in relation to the subscribed share capital.

(3) The Board of Directors, respectively the board of directors, will present to the extraordinary general assembly convened according to paragraph (1) a report on the patrimonial situation of the company, accompanied by observations of the censors or, as the case may be, of the internal auditors. That report must be submitted at the company's headquarters at least one week before the date of the general meeting, so that it can be viewed by any interested shareholder. In the extraordinary general shareholder meeting, the board of directors, or the directorate, respectively, will inform the shareholders about any relevant facts that occurred after the drafting of the written report.

(4) If the extraordinary general meeting does not decide on the dissolution of the company, then the company will be required to cut the share capital by an amount at least equal to that of the losses that could not be covered via the reserves, at the latest by the end of the fiscal year following the year where the losses have been recorded, and subject to the provisions of art. 10, if during that period the company's net assets have not been restored to a value at least equal to half of the share capital.

(5) In case the general shareholder meeting is not met according to the provisions of paragraph (1) or if the extraordinary general shareholder meeting could not reach a valid decision on the second summoning, any interested person can file a lawsuit demanding the dissolution of the company. The dissolution can also be recorded if the company does not meet its obligations it has under provisions of paragraph (4). In any of these cases the court can grant to the company a deadline of no more than six months for rectifying its situation. The company will not be dissolved if the restoration of the net assets to the level of at least half of the share capital takes place before the court ruling on the dissolution of the company becoming final.







Clarifications concerning the Blue Air bonds

June 16, 2020, Arad | We bring the following clarifications when it comes to the bonds issued by Blue Air Aviation S.A. and owned by SIF Banat-Crişana S.A.:

The purchase of the bonds issued by Blue Air Aviation S.A. abides by the regulated prudential requirements and is part of the investment policy of SIF Banat-Crişana of supporting Romanian companies.

The subscribed bonds were acquired in December 2019. Given the negative effects which the COVID-19 pandemic caused among the airlines, including to the company Blue Air Aviation S.A., an extraordinary situation which could not be predicted in December 2019, the amendment of the prospectus of the offer was agreed upon, and the extension of the maturity by 3 months. We want to mention that on June 15, 2020, Blue Air Aviation S.A. has paid in full the interest owed up until that time.

We will appropriately inform the public concerning any subsequent events, if needed.

Bogdan-Alexandru Drăgoi

Chairman, CEO


ASF - regulation No. 9/2014 of May 29, 2014

Art. 177 1. - (1) Collective Investment entities (O.P.C.V.M.) invest in corporate bonds not listed for trading on a regulated market or an alternative trading system, in compliance with at least the following requirements detailed in the prospectuses of the O.P.C.V.M.:

a) the corporate bonds issuers need to have at least 2 years of operation at the time the OPCVM is making the investment in the corporate bonds issue. If the issuer has less than two years of operation, the S.A.I. (Investment Manager) or the competent entity of the investment company established via the investment company's bylaws, in the name of the O.P.C.V.M., will only invest in corporate bonds guaranteed by a lender authorized by the NBR or by a Romanian subsidiary of a lender authorized by another member state;

b) the annual financial statements of the corporate bonds issuer have to be audited according to the law and must indicate no significant risks (such as the solvency or liquidity risk) concerning their financial situation, likely to result in their failure to meet their payment obligations for the coupons and the principals of the corporate bonds issue;

c) the issuer of corporate bonds must not be recorded in the list of taxpayers with unpaid tax liabilities published on the website of the Romanian Tax Administration (ANAF);

d) the corporate bonds issuer must have been profitable over the course of the last three consecutive fiscal years, as demonstrated by the financial statements for the years in question, audited according to the legal requirements; if the corporate bonds issuer has less than two years of operation, then it is required to have been profitable during all the previous fiscal years.

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