Negotiations to begin for the first €70 mln tranche of a loan for BDZ

The International Bank for Reconstruction and Development (EBRD) or the World Bank will extend a €240 mln loan for rehabilitation of the railway infrastructure. The first tranche of €70 mln is earmarked for modernisation of the Bulgarian State Railways (BDZ). Today, the Government asked for a mandate from Parliament to negotiate the terms of the loan.

The company plans to repay some of its liabilities to creditors and suppliers with part of the money before receiving a World Bank loan totaling €600 mln. Some €460 mln of this amount will go to BDZ and the remaining €140 mln - to the National Railway Infrastructure Company.

The loan is part of a large programme for restructuring the BDZ holding company and the National Railway Infrastructure Company. However, the conditions for extending the credit include strict austerity measures. The programme contains more than 100 measures, lay-offs among them.

“The idea is to set up two independent companies - Passenger Services and Freight Services,” the holding’s Management Board Chairman Vladimir Vladimirov explained earlier. According to him, the restructuring plan was launched last year and the Locomotives company merged into BDZ. The necessary locomotives and wagons were transferred to the two companies. Part of the programme projects some 5,700 lay-offs in the companies, which caused the discontent of their syndicates.

According to sources familiar with the situation, the two infrastructure companies are virtually bankrupt – BDZ alone is indebted by about BGN 500 mln. Since it is not paying fees to the National Railway Infrastructure Company, the latter is also in a dire financial situation.

According to Ivan Valkov from GERB (Citizens for European Development of Bulgaria), Chairman of the Parliamentary Transport Committee, and his party fellow Svetoslav Ivanov, BDZ is collapsing, facing bankruptcy and decommissioning, and cannot get out of this situation without the loan for its restructuring.

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