home

politic

dipcourier

economy

finance

Hi-tech

products

about us

CASCADE CAPITAL GEORGIAN TAKEOVER

At the beginning of this year, "Cascade Capital Holdings" Press Service announced the accomplishment of transaction for acquisition of "Emporiki Bank (Georgia)" Georgian commercial bank. ARMINFO correspondent requested "Cascade Capital Holdings" CEO Jonathan Stark to comment on the unprecedented access of Armenian financial entity to foreign markets.

OUR NOTE: The structure of "Cascade Capital Holdings" includes "Cascade Bank" commercial bank; "Cascade Insurance" Insurance Company, 35% shares of which was acquired by EBRD last August; "Cascade Credit" Universal Credit Organization, which during the same period signed an agreement with U.S. Agency for International Development (USAID) on provision of credit guarantee for issue of corporate notes partially backed by the US Treasury, the first tranche of which is projected in February this year. Another CCH member is "Cascade Investments" Investment Company, which is focused on development of annuity pension security and asset management. "Cascade Capital Holdings" is an investor in all its companies.

"Cascade Capital Holdings" is owned by American businessman Gerard L. Cafesjian, the former co-owner of West Publishing - a major US publishing group. During recent years, the American businessman has launched a number of large-scale investment projects in Armenia in energy, construction and media industries. Importantly, he owns companies in power processing sectors - "SolarEn" and "H2-Economy." G. Cafesjian through Cafesjian Family Foundation is an equity shareholder in CS Media holding - a major media development business in Armenia, which includes "Armenia TV," the company re-broadcasting "EuroNews" and a number of other media projects. Cafesjian Family Foundation intends to invest approximately $25 million in building and construction of Yerevan architectural complex "Cascade" and establishment of Cafesjian Modern Art Museum. Quite recently, Cafesjian Family Foundation acquired "Armenfilm" film studio at USD 770 thousand, on condition to invest up to USD 70 million in the growth of the Armenian film industry.

Please tell us, what was the reason CCH took interest in banking business in neighboring Georgia?

It is equally conditioned by the interest in the Georgian financial market and commitments assumed by CCH toward Greek "Emporiki" Bank. Due to acquisition of the whole share holding of "Emporiki Bank (Armenia)" in 2005, CCH agreed on package deal; i.e. sine qua non acquisition from seller their Georgian entity - "Emporiki Bank (Georgia)." At the time, based on the survey of the status and potential of both Armenian and Georgian bank service market, we realized the expediency of purchasing those two banks "as a package." The transaction was concurrent with the CCH development concept, targeting at introduction of new unique financial services in Armenian and export thereof to neighboring Georgia, as well as creation of an interstate organization. Such international component of CCH will serve a major support for the promotion of Armenian-Georgian trade-economic relations. Moreover, approximately 250 thousand Armenians live in Georgia, of which more than 100 thousand live in Tbilisi. To a certain extent, we regard those people as potential clientele. Thus, we were rather interested in the opportunity to gain access to Georgian market particularly from the perspective of positive economic and social trends taking place in Georgia during the recent 2 years. From macroeconomic aspect, banking business is broader in Georgia than in Armenia in terms of both territory and population. On the other hand, there are very good banks in Georgia, however the level of penetration of banking system in economy and the population is still insufficient. That is why, Cascade Bank (Georgia) will have an adequate niche in Georgian financial market; moreover, we are planning to export our own concept of financial services.

Does it mean, that the so-called expansion of CCH into Georgia will not confine to bank acquisition?

I have read your report stating that we are trying to buy an insurance company in Georgia. I am not aware where you have obtained such information. We have not made such announcement. Nevertheless, yes, we are seriously considering the opportunities for our other entities - insurance and investment companies, among others, to penetrate into Georgia, aiming at organization of uniform businesses. You are indeed aware, that our concept is based on the idea of integrated sales where the client gets unique opportunity of receiving comprehensive financial services.

What are your business preferences in Georgia - purchase already established businesses similar to the Bank, or start up analogical companies?

We shall consider different options. If there is an insurance company in Georgia that meets our requirements, we will consider the option of purchasing such company. However, we think it is reasonable to start up our business, as our methods, values and technologies of rendering services differ from methodologies already in place at operating companies. There is a substantial peculiarity in Georgia that requires particular attention from us. I mean the circumstance that we, as a Gerard Cafesjian entity, are not as well known in Georgia when compared to Armenia. That is, we are facing the problem of making image at Georgian market, and we have much work to do in that direction. The Georgian press wrote numerous articles about the bank purchase. Positive reports and appreciations were prevailing. Of course, we have to remember that we received significant support of U.S. Embassy in Georgia. This makes us hope that the experience we gained in Armenia can be successfully exported to Georgia. Subsequently, some of our employees will work in Tbilisi for a while. This can compensate to a certain degree the lack of image, namely the fact that we are not well known in Georgia yet.

Who is consulting you in Georgia?

We receive support from international financial organizations that are active on both sides of the border, and the U.S. Embassy in Georgia. There is no third party in this process; i.e., this is solely our initiative, which is based on our resources and our experience. And, this is quite inspiring.

What was the financial status of "Emporiki Bank (Georgia)" on the verge of acquisition?

As you may presume, the bank was not in its best shape, almost in a situation similar to the former "Emporiki Bank (Armenia)" - nowadays "Cascade Bank," when we acquired it a year ago. I am not in the position of telling you the details of the transaction, however, I would like to mention that the share capital of the Georgian bank after acquisition - namely as of January 1, 2006 - exceeded USD 4.5 million. That amount meets the bank capital adequacy requirement set forth by the National Bank of Georgia.

What is your assessment of Georgian financial market? It is a complicated question. To start with, Armenia and Georgia are located on different parallels from the perspective of financial services. The potential Banking market is larger in Georgia than in Armenia. Even while taking a walk along the streets you can observe a large number of bank outlets in Tbilisi, the branch network is extensive. Furthermore, international banking organizations have long ago started to provide consulting services in Georgia. There is a whole bank chain in place established with the resources of German investors in Georgia, which does not exist in Armenia. On the other hand, bank regulation and supervision is on a higher level in Armenia. The Central Bank of Armenia has adopted a much stricter approach to such issues. To put it right, this is a fact rather than critique. In Georgia the bank operations are less regulated, banks are freer in their actions. Our advantage lies in the fact that after purchasing and launching the Georgian bank we have to follow the regulations and principles adopted in Armenia. It means that we will work mostly in conservative regime. On the other hand, I would like to state that the client treats conservative banks with respect, and laissez faire banks - with a certain caution.

How do you assess the performance of CCH entities in 2005?

I cannot cite figures. However, I would like to state that the aggregate capital of all subdivisions of "Cascade Capital Holdings" comprised approximately USD 12 million, and our goal is to reach USD 50 million this year. During one year, "Cascade Bank" has turned from a loss making company we had bought to a profit making company. By retaining the main staff of the bank and recruiting new highly qualified employees, we secured conditions of professional growth and motivation for the bank personnel. The bank operates in tough competitive environment, nonetheless the 8-month activities showed that "Cascade Bank" has taken the route we had selected for it, that is why the CCH management and shareholders are pleased with the successes of the bank. In conclusion, I would like to state that the previous year was the year of formation of CCH, during which we succeeded to launch all its entities at full speed. Now it is time to build on our initial efforts. Gerard Cafesjian has taken commitments toward Armenia and the Armenian people, and we most probably will take new initiatives this year. I will not lay all my cards on the table.

Thank you.