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Only 2 city bonds' issuing recorded a superior rating

Bucharest Equity Research Group (BERG), Consulting company, authorized by CNVM for supplying rating services relegated Sebes City Hall rating from B to 3C. BERG signals the impossibility of payment on long term of the City Hall debts. Bonds issued by Bacau and Cluj have also been relegated from B+ to B, a slight probability of delay in payment on long term. Zalau obtain a superior rate B, versus the previous 2C, and the rating for Tirgu Mures increase from B+ to 2B. Dan Barbulescu, general manager of BERG, stated that this rating service assesses the probability risk of delay in payment, both for bonds and interests implied. The ratings are useful both to issuing authorities as well as for investors. In order for the investors to be informed, the periodical publishing of the budgetary execution account, (quarterly and annual) should be performed, this data representing an important input for CR. DM-ip rating system. Data for Alba Iulia, Bacau, Cluj, Predeal, Sebes, Tirgu Mures, Zalau were collected after 6M 2003. For the rest of the cities BERG evaluated the bonds based on the financial results of 2002. City Rating Trend Previous rating. Explanation: TIMISOARA A start Reduced probability of non-payment long and short term PREDEAL 2B stable 2B Idem Timisoara TARGU MURES 2B increase B+ Idem Timisoara BACAU B decrease B+ Slight probability of non-payment on long term ALBA IULIA B stable B Idem Bacau ORADEA B start Idem Bacau ZALAU B increase 2C Idem Bacau CLUJ NAPOCA B decrease B+ Idem Bacau MANGALIA B start Idem Bacau BISTRITA 3C start Relative high probability of non-payment on long term SEBES 3C decrease B Idem Bistrita DEVA 3C start Idem Bistrita SLOBOZIA 2C start Idem Bistrita CAMPULUNG 2C start Idem Bistrita. (Bursa, pag. 5, 12.04.2003)


Sugar - the mirror of Romanian grocery industry degradation

Among 33 procesing plant only 5 continue to operate. For sugar import Romania spends $ 200mln/year. In 2003 the sugar beet cultivated area stood at 40,000ha, versus 275,000ha in 1989. Romania became a sugar importer, despite the natural conditions owned. The state barelyi encourages the sugar industry. The industry representatives afirme that custom taxes of 30% for gross sugar and 45% for white sugar are not sufficient, while Moldavia has 45% taxes on gross sugar and 90% on white one, and Hungary - 93%. A survey performed by Bucharest Equity Research Group (BERG) rating consulting indicates that in recent yearsthe state segment decresed 20 times versus the private one. In 2002 sugar production grew to 65,000tons, 18% more than 2001, but only 14% of the internal demand was satisfied, sugar imports amounting to 450,000tons. The annual sugar import costs Romania $ 200mln, stated Marius Lupu, financial analyst within BERG. Romania's yearly sugar necessary stands at 500,000tons, 90% being ensured by imports. The annual sugar beet consumption decreased at 20kg/inhabitant, while in England it reached 40kg/ inhabitant, and France, Greece, Hungary, The Czech Republic, Slovakia have a annual 30-40kg/ inhabitant.(Adevarul, 13.08.2003)


Rating for city bonds

Bucharest Equity Research Group, financial consulting company, launched for the first on Romanian market the rating service CR-DM - Credit Rating City Debts, according to a press release. The service assets the risk probability of non-payment or delay in payment for city issued shares. The methodology takes into consideration both the financial and the economical risk, based on a series of surveys performed by the World Bank, Urban Institute and USAID, regarding the assessing of credit risk of issuing cities. The rating methodology is displayed on "www.rating.ro". The highest rating is "-2B" and was awarded to the issue of Predeal City, following the high percentage of current incomes in total incomes, as well as the fact that budgetary incomes granted to Predeal City are decreasing, which points that the city is looking to obtain a financial independence versus the state budget. According to the release, the lowest rating "2C" was awarded to Zalau, due to the fact that a significant part of city's incomes account for State budget incomes. (Ziua, 12.05.2003)


Few bonds, but risky ones

Local budgets' low incomes and the lack of their financial independence versus the state budget enhance the investments' risk level when acquiring munis. According to an analysis performed by financial rating company Bucharest Equity Research Group, Romania is an unsafe market when it comes to the un-payment or postponement risk for bonds issued by Romanian cities. We consider fortunate the launching of a risk measurement system for Romanian cities that issued or intend to issue bonds in order to serve both the municipalities that intend to attract funds as well as investors that consider bonds to be attractive, stated officials within BERG. BERG's analysis shows that Predeal recorded the highest rating, 2B, due to the large amount of incomes as well as the continuously decreasing incomes that come from the state budget. This shows that Predeal county intends to be financially independent. The other cities that have been monitored by BERG were: Bacau (rating B+), Cluj Napoca (B+), Targu-Mures (B+), Sebes(B), Alba Iulia (B) and Zalau (2C). Zalau received the lowest rating as the largest part of its incomes comes from the state budget, questioning the city's capacity to achieve a relative financial independence. According to the BERG analysis, the Romanian market is not mature enough to cover potential un-payment risks, especially as there is no market history for quantifying the possible risks. Another problem is related to the lack of the T-bills secondary market for 3-5 years. According to the BERG analysis, the almost null issuing liquidity, the utilities transfers' lack of transparency from Termoelectrica to the local counties and the fact that the budgetary accounts were not published in the Official Gazette are still impediments for counties that intend to issue bonds. The relatively new offer as well as fiscal barriers place Romania behind European and Western countries when it comes to the volume of issued bonds. Unlike Romania, where the bonds' value amounts to several tens of billions ROL, the bonds' total value in US amounts to $ 1,700bn. (Cotidianul, 12.05.2003)


What should be taken into consideration when investing in shares?

How would I know if/when/how is the best way to acquire share X? The most proper answer each capital market investor should receive is "from information". Don't expect information like tips - I mean, if someone has one, why would he share his "sure" profit? One should read public information provided by companies that are listed on the Stock Exchange. Financial rating company Bucharest Equity Research Group (BERG) recently completed its second edition of Top 100. The way Top 100 is established. Top 100 Romanian Public Companies 2002 is based on public financial data provided to investors through the Bucharest Stock Exchange (BSE) and OTC market Rasdaq, as well as data found in the Official Gazette regarding targeted companies. Out of the initial non-financial companies listed on BSE and RASDAQ (financial investment companies, insurance companies and banks were excluded), those that recorded net profit in 2000 and 2001 were selected. Out of these the first 100 were selected, recording over $ 1.7mln capitalization. Companies were graded descending from 10 to 0 according to: 1) the shere capitalization size in $mln recorded in September 2002; 2) Total transfers in $ thousands in the last 12M (September 2001 - September 2002); 3) The increase in turnover expressed in $ for 2001 versus 2000 (in order to grade mergers, the increase was taken into consideration by reporting the turnover of the merged entity recorded in 2001 to the turnover recorded in 2000 by the entity that survived the merger); 4) Net profit rate in 2001. The first two indexes amount 30% of the final grade while the next two represent 20%. (Ni) stands for newly to the top companies. For companies SNP Petrom (SNP), Astra Romana (ASP) and Rompetrol (ROPE), financial results that don't include taxes for fuel trade were taken into consideration as the turnover increase rate, resulting in data different to those found in the Official Gazette. The meaning of the final grade: The issuer's importance on the capital market increase alongside with its percentage in the total transfers' value. The issuer's potential increases alongside with the profitability and its sales' expansion. The 4 indexes are independent to one another as the correlation coefficients between the 4 series are smaller than 0.27. According to BERG's manager, Dan Barbulescu, the first 10 companies in the Top could be considered investment recommendations. In the October 2001 - October 2002 period, the VAB index (representing the $ evolution of BSE and RASDAQ) recorded a 59% increase, while if someone would have invested in a portfolio formed by the first 10 companies in the top, that someone would have recorded a 112% profit expressed in $. A remarkable profit versus the market average. We also expect the same tendency to be confirmed next year, stated Barbulescu. Stock Exchange Investor's Guide. (Adevarul, 11.07.2002)


BERG decreases the STAAR rating awarded to Sterom Campina from **** to ***

In 1998, Sterom reported ROL 8bn worth gross profit but actually recorded ROL 4.53bn worth losses and ROL 154bn worth turnover. American company PCC controls 70% within the company and intends to produce American type casings that record a high demand. PCC initiated the take over bid for the rest of the 30% stake, offering a ROL 35,000 price per share. (Romania Libera, Observator, 25.11.1999)


Rating alarm for bank Banca Agricola

BERG (the only certified rating agency on the capital market) decreased its STAAR rating awarded to shares issued by bank Banca Agricola to * (future performance forecasted way under the market average over the next 12 months) from ** (performance under the market average - awarded on June 13th), as the bank is unable to pay its debts, proved by the financial data for H1 published by Bucharest Stock Exchange (BSE) and NBR regulations. The bank's equity in H1 1999 stands at minus ROL 206bn, while its payment capitalization stands at ROL 561bn. In H1 the bank's losses amount to ROL 1,647bn. According to Law 83/1998 and NBR's regulations 9/1999, the bank is unable to pay its debts. The previous ** rating was awarded based on the financial data for 1998 which were published in June. (Cotidianul, 21.10.1999)


Berg, the first rating agency authorized by CNVM, launched for the first time in Romania the rating service Romanian Shares Appreciation Tendency Scale (STAAR)

The STAAR model is similar to the rating model Stock Appreciation Rank System, developed by rating company Standard & Poor, adapted to Romanian standards regarding accounting and public information. A simplified interpretation in the STAAR system's recommendations for investors could be performed based on the forecast regarding the VAB index that will record a ROL 60% (5% higher versus T-bills) increase over the next 10 months. The following ratings can therefore be established: ***** = buy a certain percentage within the total daily transfers, even if the price increases; **** = accumulate shares at the current price; *** = keep the shares in your portfolio; ** = avoid buying these shares and sell when you have the chance; * = sell immediately. Ratings granted to major companies are: Sidex (***); Alro (***); Arctic (***); Policolor (****); Rolast (***); Rafinaria Lukoil Petrotel (**); Rafo Onesti (*); Dacia Pitesti (***); Petromin (***); Sterom Campina (****); Feleacul (**); Electromagnetica (****). (Cotidianul, pag 7, 21.10.1998)


BERG postponed the release of the first ratings due to CNVM related issues

BERG Consulting Agency recently announced the postponing of the first ratings release, which was scheduled for August 1998. Dan Barbulescu, financial director at BERG, stated that due to technical reasons, CNVM couldn't provide the rating agency with all the data, concerning the activity of companies listed on Bucharest Stock Exchange and Rasdaq, until 1997. It is possible that by the end of September 1998 BERG to award the first ratings, but for a limited number of companies, most likely 10 to 15. (Romania Libera,pag.9, 2.09.1998)


CNVM authorized BERG as the first rating agency in Romania

The first rating agency in Romania will be BERG, (Bucharest Equity Research Group), stated Stefan Boboc, CNVM president. BERG was authorized to allot ratings both for securities as for companies. The rating is performed descending, from A to E, A representing a strong recommendation of acquisition (strong buy), while E means a recommendation of urgent selling (strong sell). For the moment only few shares and companies are evaluated. BERG is targeting to inform and educate all investors. (References: Evenimentul Zilei , Romania Libera May 1998)