The Financial Times today published a letter written by four representatives of the ad hoc committee of bondholders of Kremikovtzi Jsc in relation to an article the FT published on August 26 under the title “Bulgaria told to tackle crime”.

The letter signed by Jeremy Blank,York Capital Management, UKAngelo Moskov,QVT Financial, UKAndrew Kurtz, DellaCamera Capital Management, USRedwan Merouani, Mars Capital Management, Switzerland appeared under the title “How serious is Bulgaria about corruption” and reads as follows:

“The bondholders are the largest secured creditors of Kremikovtzi through a loan of €325m. We believe this case represents another example of the criticisms of the Bulgarian judiciary, as raised in your article.

On August 6, the Sofia City Court opened bankruptcy proceedings and declared Kremikovtzi insolvent as of December 31 2005, prior to the issuance and guarantee of the bonds. We believe that this decision is incorrect and have filed an appeal against it. Indeed, it is difficult to accept that Kremikovtzi was insolvent at the time the bonds were issued in May 2006 – particularly given the Bulgarian government's integral support in the issuance of the bonds, as a 25 per cent shareholder. In fact, the government benefited directly from the bond issue to repay debts.

For the Sofia City Court's decision to be correct, it would mean that the government supported the issuance to international investors of a very substantial amount of debt by an insolvent company. The ad hoc committee is concerned that this court decision may have been made with the express intent of depriving bondholders of their legitimate rights, and in order to benefit parties wishing to purchase Kremikovtzi's assets.

We believe that it is now time for the Bulgarian government to demonstrate to the international investment community its commitment to root out organized crime and corruption. The proper handling of Kremikovtzi's insolvency could be a beacon signaling real change in Bulgaria and leading to increased confidence and investment in the country. Anything else will be a strong signal that international investors should beware of investing in Bulgaria.”