Investment bankers about impact of American crisis upon Romanian economy

American financial crisis, which culminated this week with the bankruptcy of investment bank Lehman Brothers and with the takeover of Merrill Lynch by Bank of America, will have an immediate impact upon the real estate sector in Romania, but it will be also felt at the level of big transactions supposing loan financing. The first affected on the merger and acquisitions market are expected to be the big transactions that would need financing through loans, and the buyers could become more selective, financial investors redirecting their interest towards smaller transactions.
Although the first blow was felt on the local capital market (Bucharest Stock exchange declined with more than 4% on September 15 and with more than 7% on Tuesday), the investment bankers say that, not far, the effects will also be seen on the mergers & acquisitions Romanian market, as well as at the level of domestic companies evaluation.
„It is clear that the region, respectively Romania, is not sheltered by such effects. As well, we can examine what might happen to a small economy, with higher budget deficits, as well as the repayment of foreign debt, on the background of a general liquidity crisis and the anticipated drop in the net balance of direct foreign investments, but also of the easily to anticipate reductions in non-residents remittances. I did not mention the social measures with electoral character which will do nothing but aggravate the aforementioned tendencies”, Ioana Filipescu, managing director of Raiffeisen Investment Romania says.

In the opinion of Marian Tescaru, managing partner with Altria Capital, local economy dimensions will lessen the shock coming from America. „The impact upon our region is limited for the simple fact that we are not connected to the American system. A lot of local banks have foreign shareholders and have a small weight in the world economy”, said Tescaru, appreciating that the impact of the financial crisis will be felt in Romania just towards this year-end or the beginning of 2009.
Locally, the real estate segment is the most affected by the US crisis, said Tescaru, and his opinion is also shared by Matei Paun from BAC Investment. „Since this year-start I do not think a big transaction was initiated in Bucharest in the real sector. Volumes declined dramatically and this is most obvious in the case of investment funds which finally dominate the market”, said Paun. He thinks that the real estate sector will pass through a „beneficial restructuring” which at a given moment will allow the re-launch of growth on solid basis.
On the mergers & acquisitions market the investment bankers make the inventory both of the negative effects and the positive ones.
„Maybe, so far, we under-evaluated the magnitude of the global crisis but, without speculating, it is clear that not much time will pass until we will feel the blow in full”, said Ioana Filipescu, managing director of Raiffeisen Investment Romania.
Investors on the capital market already felt the effects of the liquidity crisis and on the mergers & acquisitions market the bigger transactions are expected to be the first affected and all buyers, both those financial and the strategic ones, will become increasingly selective when they will select the acquisition targets.
The US liquidity crisis will have long-term echoes worldwide and for a long time and the local banking system will get caught in this domino effect, say analysts. „There are a lot of corporate credits with over-evaluated properties as collateral. The healthy appearance of our banking system is an illusion. They sit on some guarantees that, in case they are used, will prove to have half of the initial value. Mind the local banks! Suddenly the quality of the shareholdership has become important”, the representative of BAC Investment Banking (Romania) concluded.
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