Romania Pushes Proprietatea Fund Share Conversion Deadline To July 31

05.12.2011 By Florentina Dragu

Romanian government decided that compensation rights held by property owners wrongfully expropriated during communism be converted into shares in investment fund Fondul Proprietatea (FP.RO) by end-July, according to a document obtained by MEDIAFAX.

Conversion procedures were resumed May 2, after a temporary suspension between January 11 and April 29.

Since the existing regulations don't stipulate a deadline by which conversion applications filed during the period of suspension must be responded, the government decided to set a time frame of up to 60 business days.

The government said that issuing a large number of shares in Fondul Proprietatea over a shorter interval could lower the share price considerably.

"The lower share price will implicitly lead to a swifter decline in the number of shares the state owns in Fondul Proprietatea, which in turn will have a negative impact on the restitution process," the document noted.

Thursday, Fondul Proprietatea's shares closed down 5.97% to RON0.503 (EUR0.122).

Romania's Finance Ministry owns 36.79% (5 billion shares), in Fondul Proprietatea. The ministry is supposed to cede nearly one third of its holding to private individuals who opted to convert their compensation rights into shares over the January 11-May 2 period.

Setting a two-month deadline for conversion procedures limits the decline of government's stock in Fondul Proprietatea. At the same time, the authorities will benefit from a larger dividend payout from the last year's profit.

Two weeks ago, the ministry requested Fondul Proprietatea pay out a gross dividend of 0.03141 lei (around EUR0.0076) a share from 2010 profit, double compared to the initial recommendation made by administrator Franklin Templeton.

Fondul Proprietatea will pay total dividends worth RON432.7 million (EUR105.7 million), equal to 95% of the 2010 net profit.

Romania would cash some RON160 million.

Additionally, the ministry asked that only shareholders registered by May 10 benefited from the payout. Franklin Templeton proposed May 16 as registration deadline for shareholders.