British investor interested in buying Latvian bank

Mar 3, 2010, 14:46 GMT

Riga - An investment group headed by British banking and mining magnate Peter Hambro said Wednesday that it was interested in buying part of rescued Latvian bank Parex, the Baltic News Service reported.

'I think acquiring part of Parex is a very interesting investment in Latvia's current economic situation,' Hambro said in a statement issued on behalf of investment group VMHY.

VMHY said it had registered an interest in acquiring several parts of Parex, including its asset management and private banking divisions in former Soviet countries, plus Swiss subsidiary AP Anlage und Privatbank.

Hambro is chairman of the third-largest Russian gold mining company, Petropavlovsk, and is a scion of a famous British banking dynasty.

The statement did not specify how much money had been offered for the assets, and Latvian government sources were remaining tight- lipped about any possible deal.

The Latvian state, which bailed out Parex, holds around three quarters of shares in the bank and is anxious to recoup as much cash as possible. Investment bank Nomura has been hired to draw up plans for Parex's possible break-up and sale.

Ministers are due to discuss Nomura's recommendations on March 9.

Parex was founded in 1992 and spent years as a high-flying bank with an ability to attract sizable deposits from rich Russians as well as local clients.

However the credit crunch brought it to the edge of collapse in 2007, which in turn dragged the Latvian state to the verge of bankruptcy when Parex was nationalized in 2008.

An emergency bail-out by the government and subsequent injections of cash have seen more than 1 billion dollars spent on propping up what was the largest home-grown financial institution in the Baltic states.

Latvia turned to the International Monetary Fund (IMF) and other international lenders, including the European Union and World Bank, for a 7.5-billion-euro bail-out in the wake of the crisis at Parex.

Prominent local businessman Nils Melngailis was appointed to reshape Parex and has managed to restore some stability by renegotiating the repayment terms of a large syndicated loan and attracting the European Bank for Reconstruction and Development as an investor.