The money the French group Axa should bring in as capital increase for the company it owns in Romania might be the sole lifesaver for Astra Asigurari. The decision is now to be taken by the Financial Supervisory Authority. Even if it issued a preliminary agreement where it underlines that Astra taking over Axa Romania is a key element for saving the company, ASF hesitates to make the last move. A document we saw reveals that Astra’s special administrator KPMG also sees closing this deal as essential. In a complaint it sent to ASF, KPMG wrote: “Because Astra won’t benefit from the funds obtained as result of the Axa’s capital increase (as direct consequence of ASF failing to issue the necessary approvals by 21 July 2014) there will be negative consequences not only regarding Astra and its customers, but possibly regarding the stability of the entire insurance market; these consequences are directly against the ASF’s declared goals.” According to the latest data published by KPMG, on 30 June 2014 Astra Asigurari had a liquidity ratio of only 0.03, significantly below the ASF requirements (1) and substantially lower than on 31 December 2013 (when it was 0.12).
A vicious circle. The French money could save Astra
Under these circumstances, the money the French owners committed to bring in as capital increase for their local branch could make the difference between bankruptcy and keeping afloat. Especially as, according to some sources, we are talking about over 21 million EUR. Only that the whole issue is for now in a vicious circle. ASF revealed for Mediafax it won’t approve the deal with Axa until Astra will get back on its feet by itself, through a capital increase of 490 million RON that will help it fulfil the liquidity requirements. In the meantime, Axa won’t bring in the money until its shareholders are certain their business in Romania can be taken over by Astra.
The ASF’s standing is so much more interesting as, according to the above mentioned document, it has already asked for proves regarding the Axa group’s intention to increase the subscribed capital of its Romanian branch. “At same the time, the ASF’s request that the papers concerning the Axa’s capital increase to be filed in signifies, in our opinion, that ASF approved on 21 July 2014 Astra’s intention to become a significant shareholder within Axa”, the document read. Additionally, even the head of the Insurance and Reinsurance Department within ASF, Fanel Plopeanu, was mentioning, in a document quoted by Hotnews, about the key importance of the ASF approval: “The ASF approval of the deal according to which Astra SA acquires Axa Romania as a key part in the process of improving the liquidity indicators and as a component of the financial restructuring through the involvement of a strategic investor.”
Under special administration
In February 2014, ASF decided to start the financial restructuring procedure through special administration for Astra Asigurari. It suspended the shareholders and the management and appointed KPMG as special administrator. The main shareholders’ legal duties were also suspended and transferred to the special administrator, which also received the voting rights regarding appointing and dismissing the members of the supervisory board, the dividends, the activity of the supervisory board, and their salaries. Astra Asigurari is owned by The Nova Group Investments Romania SA – 72.68% and Epsilon Estate Provider SRL- 27.02%, along with several other physical and legal entities (0.3%). The Nova Group Investments Romania SA and Epsilon Estate Provider SRL are indirectly controlled by the Romanian businessman Dan Adamescu. The February 2014 decision was taken as ASF noticed that Astra underestimated on purpose the damages it might be forced to pay, so that the financial reserves it had were 40% (100 million RON) lower than they should have been. An ASF report was also mentioning Astra issuing large intra-group loans, signing reinsurance contracts with companies based in Cayman Islands and noticed a risk of non-payment in case of natural disasters.
