CFR Marfa, another failure for Romania’s Government

Without being a surprise considering the latest events, Romanian Government failed to carry out the privatization of CFR Marfa, checking another fiasco on its list. Next foreseeable step: finding someone to blame as both parties involved – the Ministry of Transport and GFR, don’t admit any liability for this failure.

Looking at their statements, the handiest to blame on is Secretary Cristian Ghibu, the president of the Privatization Commission and the one who signed the privatization contract since Prime Minister Victor Ponta avoided doing it himself.

‘It’s Mr. Ghibu’s responsibility to handle the privatization process in the benefit of Romanian state that gave him this assignment ever since February 2013 when he was appointed at the lead of the privatization commission and later, in September 2013 when he signed the privatization contract with the winner of the auction. Since the beginning of the mandate as minister I asked Secretary Ghibu to focus on successfully completing the privatization process.’ said Ramona Manescu, Romania’s Minister of Transport through a release of the ministry. Following this statement Manescu declared that the Ministry fully met the required conditions for the transfer of property towards GFR and therefore, the railway company could have made the remaining payment.

On the other hand, Gruia Stoica, the GFR’s owner kept from naming a specific responsible: ‘It’s not my concern to make judgments about who is to blame, but I can tell you how disappointed I am by the way things happened. I am sorry not only for the impact on Romanian Railway Group and me, but also for the 11.000 employees of CFR Marfa, because we don’t have a successful privatization of a Romanian company and because that will be seen outside the country.’ shows a company release.

However, he exempted GFR from any liability, stating that the Privatization Commission informed them that they cannot be called on finalizing the privatization. According to the same GFR’s release, the Privatization Commission notified them during a meeting on Monday, October 14, the last day when it could have been carried out, that there were two compulsory requirements not met and consequently, GFR had no legal basis to pay the rest of the amount, about EUR170 million.

 ‘We’ve been invited to the Ministry of Transport today to be notified by the Privatization Commission that we cannot be asked to pay the remaining amount for 51% of the CFR Marfa shares, because the suspensive conditions of the privatization contract have not been met. Some of the CFR Marfa creditor banks have not consented to the change of the ownership structure and the Competition Council did not have time to give its approval. Under these circumstances we’ve been convened to take notice of the impossibility of carrying out the privatization. If the ministry will agree to waive the confidentiality clause, you will see that there’s a precise disposition of the steps that should be taken before paying the price. The payment that GFR was supposed to make was only the last one of these steps’ stated Gruia Stoica.

Besides that, GFR considers the main factor causing the failure is the fact that there has not been established the number of shares afferent to the 51% quota that was supposed to be transferred to GFR and therefore the capital diminution by the amount of the transferable assets to other state-societies was not made.

Although the privatization failed, the game is not over, each party moving responsibility to the other creating a cycle that will be probably interrupted by a legal dispute. And that considering all the statements made up to this point by Gruia Stoica and especially the last one of Ramona Manescu who said that the Privatization Commission and the consultants (Deloitte and Musat si Asociatii) analyze the opportuneness of keeping the EUR10 million guarantee from GFR. Whether it will spark before starting over the privatization or later, we’ll see, as well as whether GFR maintains its interest in taking over CFR Marfa in such conditions.