Bancorex was the largest bank in Romania during the 1990s, accounting for more than a fourth of the banking market share when it was closed down in 1999. The bank failed due to non-performing loans that were related to political corruption, especially behind-the-scenes political dealings. The bank was bailed out by the Romanian state, its good assets being then merged with the more solvent Banca Comercială Română .
8-499: It was founded as the Banca Română de Comerț Exterior ("Romanian Bank for Foreign Trade") in 1968 and for decades it was the bank through which much of Romania's foreign trade was conducted. Toward the end of 1997, Bancorex received a sum of $ 600 million from the government, representing 2% of Romania's GDP. The recapitalization was followed by a management change in April 1998, but not by
16-507: A restructuring, and the situation of the bank further deteriorated. It was only in late 1998, when a crisis hit Bancorex again, that the government considered restructuring the bank, eyeing a privatization procedure. By 1999, it became clear that a recapitalization of the bank would require $ 2 billion (almost 6% of Romania's GDP), which couldn't have been afforded by the government. A February 1999 estimate said that $ 1.7 billion (or 85-90% of its loan portfolio), much of it in foreign currency,
24-473: Is a leveraged buyout , essentially a leveraged recapitalization initiated by an outside party. Usually, incumbent equityholders cede control. The reasons for this transaction may include: Another example is a nationalization in which the nation in which the company is headquartered buys sufficient shares of the company to obtain a controlling interest . Usually, incumbent equity-holders lose control. The reasons for nationalization may include: Nationalisation
32-452: Is essentially a move by the nation of the company to acquire controlling interest in the company, either through buying majority shares with a motive to: 1) eliminate dominance of the shareholders. 2) own controlling interest in the company It can also be an attempt by the national government to rehabilitate its position financially by issuing bonds to increase public debt and meet immediate liabilities. This economic term article
40-401: Is replaced with debt or vice versa. In more complicated transactions, mezzanine financing and other hybrid securities are involved. One example of recapitalization is a leveraged recapitalization in which the company issues bonds to raise money and then buys back its own shares. Usually, current shareholders retain control. The reasons for such a recapitalization include: Another example
48-413: The politicians that approved non-performing loans. . 44°25′58″N 26°05′46″E / 44.432751°N 26.096164°E / 44.432751; 26.096164 Recapitalization Recapitalization is a type of corporate reorganization involving substantial change in a company's capital structure . Recapitalization may be motivated by a number of reasons. Usually, the large part of equity
56-529: Was non-performing. This sum represented 5% of Romania's GDP at the time. In April 1999, Bancorex collapsed as depositors lined up to get their savings out of the bank. In order to prevent further bank runs , the Romanian authorities decided upon a fast liquidation , transferring bad assets to a newly created Asset Recovery Agency, while deposits and most of the structure of Bancorex were absorbed by another state-owned bank, Banca Comercială Română. The banking license
64-508: Was withdrawn on 31 July 1999, effective from 2 August 1999. The Romanian government compensated Banca Comercială Română for the liabilities transferred from Bancorex and it gave the right to refuse any assets of Bancorex. In 1999, the government took into public debt from Bancorex a sum of $ 1.5 billion, or 4.5% of GDP, in addition to the 1997 recapitalization of $ 600 million and the assumption of some off-balance-sheet items and legal liabilities that have not been disclosed in order to protect
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