– The company “Synergy Wealth Management” claims that Srpska owes it 2.9 million KM
– Ministry: We have never established a contractual relationship with that company
– What happened to the bonds on the Vienna Stock Exchange?
GENEVA, BANJA LUKA – Thanks to the reliable promises of the Minister of Finance of RS Zora Vidović, Republika Srpska could soon become recognizable in the world as a seller who does not fulfil the agreed obligations.
Photo: RS Government / Illustration
Minister Zora Vidović boasted in April last year that Srpska had achieved great success by being able to come out and borrow 300 million euros on the London Stock Exchange.
“Only a credible seller and buyer can come out here, and Republika Srpska is. Only sovereign states are listed on this stock exchange, and the great advantage of Srpska is that it came out to be recognizable and visible in the world“, said Minister Vidović at the time.
The minister was right about one thing. Republika Srpska could indeed become recognizable and visible in the world, but not as a credible seller, but as someone who does not fulfil their obligations.
As it is known, Republika Srpska borrowed 300 million euros in April last year by issuing bonds on the London Stock Exchange, at an interest rate of 4.75 per cent.
The complete preparation of the show took place far from the public eye, and the Government did not announce much more information even after the show.
CAPITAL, however, provides details on how the preparation of the show went, with which investors the representatives of the Ministry of Finance met and when, and why another million-dollar dispute was initiated against Srpska a few days ago.
Discussions regarding borrowing from the London Stock Exchange began in 2019
It all started in October 2019 when the Swiss company “Synergy Wealth Management” got in touch with the RS Ministry of Finance.
Then, according to the claims of this company, it was agreed that it would mediate and look for buyers for Eurobonds for the RS Government.
Although the communication between the two sides lasted a year and a half, and although several meetings were held between representatives of the Ministry of Finance and “Synergy Wealth Management”, during which the company agreed to contact potential investors on behalf of the government, the agreement to date has not been signed.
That agreement, among other things, was supposed to agree on compensation for the Swiss company.
After previously established oral contacts, by an act of October 28, 2019 entitled “Advisory mandate for access to global capital markets”, the company submitted an offer and informed the Minister of Finance that in cooperation with the Ministry it can identify sources of funding and issue a reference Eurobond on behalf of the Ministry finance.
In that act, an action plan was presented, which included the appointment of the legal representative of the company “Synergy Wealth Management”, Majid Dušan Pajić, as a strategic advisor to the Minister.
Likewise, presented there are the financial conditions of cooperation, which include reimbursement of travel expenses and compensation to the plaintiff of 0.5 per cent of the main amount of the Eurobond if the issue is successful.
According to the company, the offer was accepted at a meeting held in early November 2019 at the Ministry of Finance, and on the basis of this agreement, consultant Dušan Pajić began contacting banks, including JP Morgan, Deutshe Bank, Morgan Stanley, HSBC and others.
As proof that the Ministry accepted the cooperation, they also state that the Assistant Secretary General for IT of the RS Government, Krsto Grujić, opened an email to the company's representative Dušan Pajić at the end of November 2019 on the domain vladars.net.
However, the agreement was not signed even then, and Pajić submitted a draft to Minister Vidović on two occasions at the end of 2019, but did not receive the signature, although in the meantime he held meetings with representatives of leading world banks and informed the ministry.
Viber messages with Zora Vidović
By the way, all communication during the preparation of the show went through the Ministry of Finance, while Prime Minister Radovan Višković rarely got involved in this business.
During the entire disputed period, the legal representative of the prosecutor, Majid Dušan Pajić, was in direct contact with Minister Zora Vidović via the Viber application, about which he submitted evidence to the court.
Also, in that period, a meeting was held, which was attended by the Prime Minister of RS, Radovan Višković, and at which the order was corrected, so that the anticipated amount of the issue was reduced to 300 million euros.
About the amount of indebtedness and how a much lower interest rate could be obtained later in the text…
Then, at the beginning of 2020, meetings and presentations of Republika Srpska were held in Vienna and Banja Luka with representatives of Citibank, Societe Generale, JP Morgan and Raiffeisen International.
The Swiss consultant emphasizes his active role in the organization of these meetings, after which the financial markets will be closed from March 2020 due to the coronavirus pandemic.
He claims that he continued to provide advisory services to the Ministry of Finance, which he informed about the contacts with new potential sources of financing, including RTB, SocGen and Citi, and Raiffeisen, and that since January 2021, activities aimed at issuing RS Eurobonds have continued.
At the end of February, he again submitted to the Ministry of Finance an agreement on strategic cooperation in which a compensation of 0.5 per cent is envisaged, on which, as he states, the Ministry had minor objections, but which did not refer to the amount of compensation.
Minister Vidović is also involved in the complete communication with the representatives of the ministry, from February 25 to March 8, 2021.
The company points out that, despite the delay of the Ministry of Finance in signing the agreement on strategic cooperation, they continued to provide advisory services until the final issue of Eurobonds.
In the meantime, RS bonds were sold on the London Stock Exchange, and the show was hosted by the renowned world bank “Societe Generale”, with which the Government of Srpska, according to the consultant, was brought into contact by him.
Zora Vidović offered a settlement and a total of five times lower
Although the show is over, the contract that the consultant has been waiting for, for almost a year and a half, has still not been signed, which is why Pajić requested a meeting with Zora Vidović in the spring of last year to try to agree on the payment of the disputed fee.
As he claims at that meeting, the minister offered him a payment of 300,000 euros, or five times less, which he refused.
Photo: Agencije
However, as the disputed relationship has not been resolved even after that, on June 25 last year, Pajić submitted a warning to the RS Government before the lawsuit, but even that did not yield results.
Therefore, a few days ago, he filed a lawsuit against Republika Srpska in the District Commercial Court in Banja Luka, amounting to 2.9 million KM.
From the lawsuit, which is in our possession, it can be concluded that the RS Government paid significantly higher fees to intermediaries during the issue of shares on the Vienna Stock Exchange a few years ago, which is why Pajić states that “if Srpska does not accept 0.5 per cent of the issue, ask to determine the amount paid for similar emissions”-
It is interesting that he stated here that he would ask reputable international auditing companies to determine the agreed and paid compensation in the “unsuccessful project of issuing RS bonds on the Vienna Stock Exchange in 2018”.
Commenting on the lawsuit, Mađid Dušan Pajić told CAPITAL that from October 2019 to April 2021, his company mediated and enabled Republika Srpska to issue 300 million euros on the Eurobond market in London, without Republika Srpska paying anything for the agreed and executed service.
Violation of this obligation, he says, is surprising and unacceptable because it comes from the highest bodies of the entities in BiH, which aspires to business and independence in such cases of financial transactions in foreign markets.
Who are the buyers of bonds on the London Stock Exchange
The Government of Srpska has never announced who are the buyers of bonds issued on the London Stock Exchange, and one of our sources states that among these buyers are most likely the French fund “Amundi”, German funds “DIT”, “DWS”, “Union Invest”, from Great Britain “Ashmore”, “Franklin”, “Templeton”, American funds “Blue Bay”, “Fidelity”, “PIMCO”, “TCW”, “T Rowe Price” and Austrian funds “RBZ” and “Erste”.
Among the investors are insurance companies “Allianz”, “Axa”, “Zurich”, “Prudential” and “Scottish widows”, as well as private banks such as UBS, CS and Julius Baer.
“Such a drastic breach of obligations undermines trust in RS and its authorities for any future transactions on the international financial market, because they will hear about this very soon. Also, this endangers the refinancing of 168 million euros of bonds issued on the Vienna Stock Exchange, which mature in April 2023“, says Pajić.
Pajić: I witnessed the negative impact of bonds issued on the Vienna Stock Exchange on RS finances
Pajić claims that during the cooperation with the Ministry of Finance and the Government of RS, he witnessed a very negative impact of bonds issued on the Vienna Stock Exchange on RS finances and its financial reputation.
He also states that the Government of RS consciously missed the opportunity to borrow 500 to 750 million euros on the international financial market with an interest rate of three to 3.5 per cent in 2020, instead of borrowing 300 million euros with an interest rate of 4.75 per cent in April 2021.
“We expect that, despite the unreasonable behaviour so far, the RS authorities will reconsider their decision and settle their financial obligations for the provided service”, says Pajić.
Ministry: The Swiss company has never been hired as a consultant
We also asked the RS Ministry of Finance for a comment regarding the accusations of the Swiss company, in which they claim that this company has never been hired as a consultant in any respect on the bond issue.
“The RS Ministry of Finance has never entered into a contractual relationship with the Swiss consulting firm “Synergy Wealth Management”, nor has it ever been engaged as a consultant in any respect on the London Stock Exchange bond issue“, the Finance Ministry of RS told CAPITAL.
However, CAPITAL is in possession of the official document “Request for Proposal“, which was signed by Minister Vidović, and on which Dušan Pajić is mentioned as one of the recipients of proposals for financing RS from banks.
Also, the lawsuit states that the lawyer Miloš Stevanović attended several meetings, who confirmed that for CAPITAL himself.
Regardless of who is right, it is obvious that Republika Srpska is waiting for another million-dollar dispute, and if it loses, it is clear that it will cost its citizens more than 2.9 million KM, given that the prosecutor is also demanding default interest.
We remind you that Republika Srpska issued bonds in the amount of 300 million euros on the London Stock Exchange in April last year, and the costs of selling bonds will amount to over 146.5 million KM.
CAPITAL
