Borrowers will be able to repay early their floating rate consumer loans and incur no prepayment penalty under a new bill being drafted by the Bulgarian central bank.

The bill will transpose relevant community law which should be enforced by the member states from May 2010.

The bulk of the consumer loans in the portfolios of the Bulgarian banks have a floating rate. The new rules will apply to loans contracted after the new bill has taken effect.

Financial experts told Dnevnik they did not expect the new rule to have a significant impact on customer behavior because loan prepayment is cyclical and is done when the competition among the lenders is intense, the rates are low and the refinancing is a bargain. In their view, such a confluence of events is unlikely to be witnessed on the local market over the near term.

Some experts said the banks will either pass on their consumer credits to their non-banking financial units or will introduce additional charges as part of loan services that will be calculated into the cost of borrowing.

The broad consensus is that the new rules will not prompt the banks to switch to fixed rates because it is difficult to anticipate the cost of the lending resource in a couple of years. The cost of the external lending resource rose sharply in the past 10 months. The rates on deposits, which provide the banks with some of their lending resource, have also gone up.(Dnevnik)

A working group set up by the Bulgarian economy ministry to investigate the handling of gas transit fees by Bulgargaz and Bulgartransgaz has recommended a regulatory penalty for the two companies for breaches of their respective licences, sources from the working group told Dnevnik.

The check was ordered by energy minister Petar Dimitrov after Bulgartransgaz executive director Angel Semerdjiev asked the prosecution authorities to investigate if the agreement between trader company Bulgargaz and the transmission company on the collection and distribution of fees paid by Russia's Gazprom for the transiting of its gas via Bulgarian territory violated the energy law.

The agreement puts the trader in charge of the collection of the fees instead of the transmission company as is required by the gas directive.

Last week, Konstantin Shushulov, chairman of the State Energy and Water Regulatory Commission, admitted indirectly that the fees should be pocketed by Bulgartransgaz and not by the trader. At the time, the official said the ministry was tackling the problem.

State-controlled gas distributor Bulgargaz has been restructured and since then the regulator has not checked the implementation of the licences it has granted.

Several sources said the two gas companies may most likely avoid a penalty because the regulator would opt to instruct them how to align their business relations to the relevant laws. That would entail the signing of a new agreement, putting the transmission company in charge of the fee collection.

The working group has also discussed the possibility to terminate the agreement between the two companies, an option that Bulgargaz claims would plunge it into financial crisis.(Dnevnik)

Vorskla Steel, controlled by Ukrainian billionaire Konstaitn Zhevago, is preparing to join the operative management of debt-ridden Bulgarian steel maker Kremikovtzi, said Viktor Demyanyuk, Zhevago's reprehensive in Bulgaria.

'A meeting is scheduled on Monday with executives from [gas supplier] Bulgargaz, [power utility] NEK and [railway carrier] BDZ to negotiate a repayment scheme [for Kremikovtzi's debts]. Consultants will be hired immediately in connection with the environmental program that will have to be implemented,' said Demyanyuk.

In July, Vorskla Steel signed a tolling agreement with Kremikovtzi. Some of the managers of the Bulgarian company later said the agreement was signed under coercion and notified the prosecution authorities. Although the agreement was declared null and void by the managers that opposed it, Vorskla continued to supply input materials to Kremikovtzi with the management of the Bulgarian steel maker constantly delaying the recognition of the arrangement by suggesting a series of annexes.

Last Friday, Demyanyuk said the plant will produce 60,000 to 70,000 tons of steel per month in the first 60 days. An upgrade that will be launched immediately will later increase the output to 95,000-105,000 tons per month.

Kremikovtzi receiver Ana Milenkova said she has approved for implementation neither the tolling agreement with Vorskla Steel nor that with India's Arcelor Mittal 'There are two contracts and both of them should be honored,' she said.(Dnevnik)

Despite the effects of the credit crunch and forecasts for an overall slowdown in economic growth, Bulgarian GDP defied the expectations of economists by achieving 7% growth in the first quarter of 2008, real estate consultants CB Richard Ellis said in an H1 Sofia office market overview.

Bulgaria remains attractive to international companies that outsource and offshore parts of their activities to the country, driven by the availability of well-educated and experienced specialists at lower salaries as compared to all of CEE, Western Europe and the U.S., as well as the low corporate and personal income taxes (both 10%), etc. Therefore, according to the report, Sofia’s office market will continue to develop actively at least in the next 2–3 years.

Office space completion in H1 2008 set a record, with completions coming in at levels of over 87% of all completions in 2006 and 58% of all completions in 2007, said CB Richard Ellis. As a result of this large amount of completions, Sofia now has modern office stock of approximately 808,000 sq m. This number will continue to increase, in view of more than 250,000 sq m scheduled for completion by the end of the year. That said, the consultancy doubts that all announced office projects will actually enter the market by the end of the year.

Approximately 250,000 sq m office space are scheduled for completion by the end of 2008. Nevertheless, CB Richard Ellis expect that no more than 150,000 sq m will actually enter the market by the end of the year. Another 500,000 sq m are expected by the end of 2010, to make the total pipeline approximately 750,000 sq m.(Dnevnik)

Advance Terrafund, the local real estate investment trust, said its agricultural land totaled 24,300 ha by the end of July, up 500 ha month-on-month and 5,300 ha year-on-year.

The average acquisition cost was reported at 2,590 levs/ha, up 4% year-on-year.

Land lease revenues reached 682,600 levs for the agricultural year ended July.

The REIT said it has leased 70% of its land stock for the next agricultural season with lease revenues estimated at 2.1 mln levs.

The company's rights issue started trading on the Sofia bourse last Thursday.

The minimum subscription target for the issue is 25 mln new shares.

Full subscription will ensure a capital increase to 110.14 mln levs.

Some 2.8 mln of the rights have already changed hands at a price of 0.01 levs.(Dnevnik)