Bulgaria to start direct talks with banks over energy financing

SOFIA, Nov 12 (Reuters) - Bulgaria's state energy holding company BEH will start direct talks with banks over 650 million euro ($697.65 million) debt after a tender to raise the funds collapsed, deputy Energy Minister Nikolai Nikolov said Thursday.

BEH's plans hit a stumbling block last month when it received only two binding offers for the debt. Both asked for state guarantees on the bridge financing ahead of a global bond, sources familiar with the situation had told Reuters.

"The offers that were received did not meet the requirements of the procedure. It (Other OTC: ITGL - news) however allows the start of direct negotiations with the interested banks," Nikolov told reporters.

The finance ministry has declined to extend state guarantees before the huge deficits in the energy system in the Balkan (LSE: 0IS4.L - news) country are properly addressed.

BEH will now invite 12 banks that have declared initial interest and may also ask other lenders to start talks to organise a bond and a bridge loan ahead of it, a source familiar with the process told Reuters.

These include banks that have filed offers as a consortium - Citigroup (NYSE: C - news) , HSBC, Unicredit (EUREX: DE000A163206.EX - news) , Societe Generale and ING. The other offer was from Banka IMI, the investment arm of Intesa Saopaolo.

Other banks that have expressed initial interest include Raiffeisen, Goldman Sachs (NYSE: GS-PB - news) , Morgan Stanley (Xetra: 885836 - news) , Deutsche Bank (Other OTC: DBAGF - news) and BNP Paribas (Xetra: 887771 - news) , two sources with knowledge of the issue said.

BEH needs the proceeds urgently to enforce a deal with two U.S (Other OTC: UBGXF - news) . thermal power producers AES and ContourGlobal, under which the two will lower the price at which they sell their output to BEH's unit, public power provider NEK.

In September, Fitch credit ratings agency downgraded BEH's long term rating to BB- with a negative outlook, predicting weak credit ratios due to a widened tariff deficit at NEK. NEK's total dues stand at over 3.7 billion levs ($2.04 billion).

"It should be clear by the end of the year whether the talks will be successful or not," the first source said.

($1 = 0.9317 euros) ($1 = 1.8146 leva) (Reporting by Tsvetelia Tsolova; Editing by Tom Heneghan)