Global investment adviser Pravin Banker says this is “absolutely the right time” to invest in the emerging Balkan countries, Bulgaria in particular. Mr Banker is executive director at Global Financial Network Inc (GFN), a Greenwich, Connecticut-based banking/financial advisory boutique for the emerging countries of

Latin America, Russia, the Commonwealth of Independent States, the Balkans, Asia (including south-east Asia) and Africa. He also is a key partner at Balkan Capital Management (BCM) in Sofia, Bulgaria.

Mr Banker, with 30 years’ experience in global capital markets, serves a roster of clients including a number of governmental agencies and central banks in emerging countries. His group directly oversees a portfolio of €50m ($73m) and advises other funds, such as Bain Capital, Fidelity Investments, Gramercy Funds and Scoggin Funds, that are interested in alternative investments, he says. BCM is a Bulgaria-registered financial firm that advises the group on Balkan region investments.

“We are restructuring experts and focus on turnaround situations. We managed the restructuring of Essar Steel Ltd from the depths of the steel crisis in mid-2000 to early 2005,” says Mr Banker. Essar is western India’s largest steel production firm. But it is the relationship between India and the Balkans that Mr Banker is turning his attention to now.

“I define the Balkans as Albania, Bulgaria, Greece, Romania, Turkey and all of the former Yugoslavia,” he says. “We brought Cipla (India generics) into Bulgaria, introduced Mahindra into Romania, and assisted Pramod Mittal in acquiring Kremikovtzi Steel Co (Bulgaria) and in helping Merrill Lynch complete the issuance of a €325m bond issue in April 2006.”

Proven potential

Pramod Mittal is the controversial chairman of India’s Ispat Industrial Ltd, and also the chairman of Global Infrastructure Holding Limited. His older brother, Lakshmi Mittal, a high-rolling London resident and Indian entrepreneur, owns SIDEX, Romania’s largest steel company. He derives huge earnings before interest, taxes, depreciation and amortisation (EBITDA) from SIDEX, according to sources close to the situation. EBITDA measures a company’s estimated operating cash flow.

Currently GFN is heavily focused in the Balkans, India, Indonesia and has a developing interest in Africa and Vietnam. Since 2004, GFN has looked at west Africa and the Sudan “simply because of the large Indian corporates we have relationships with who are actively seeking minerals such as iron ore, manganese/cobalt and crude oil”, says Mr Banker.

Geographical regions with the greatest future investment returns in the Balkans are quickly coming onstream. “Greece has been saturated and Greek ship owners, floating in billions of monies because of the great demand for bulk carriers, are leading the investments in the rest of the Balkans,” says Mr Banker.

Poland is somewhat saturated with investments and reflects rising prices, too. “Bulgaria, Romania, Serbia and Turkey offer the greatest (investment) rewards,” he says. “Since they have a lower GDP per capita than the developed EU, they have the furthest to go.”

This means they can lead to high returns for investors. To back up his point, Mr Banker says: “Just look at Ford Motor Co’s decision to invest heavily in Romania, resurrecting the bankrupt Daewoo facility there; and look at [improved] stock market performances in these countries – their market cap is increasing rapidly.”

GFN also works with major global hedge and equity funds such as Gramercy, Polygon, Scoggin, Spinnaker and Texas Pacific Group. The firm handles special situations in distressed businesses and alternative investments for returns exceeding 20%.

Before taking on a distressed client, GFN must first assess business merit and the complex causes of becoming distressed. “Is it bad management? Lack of organisation? Capital? Over-leveraging? Declining markets? Or obsolete products?” Mr Banker asks clients.

Taking action early

Ideally, GFN would like to work with distressed companies before they are approaching collapse. “Unfortunately, they go to the big names first and come to us only when they are on ‘life support’,” says Mr Banker. He cites Essar Steel which in 2000 secured Bank of America and “retained us formally in 2001” when they were in deeper trouble.

Interestingly, he is sceptical of the current investment rush to China: “This country is

dangerous. In sharp contrast, India is far safer,” he says.

“China is in the grip of ‘mah jong’ speculation even with provincial banks, with money from the Central Bank playing at it,” he adds. “First it was goods over-production, then moving into real estate, and now [affecting] stock markets from Shanghai to Hong Kong, all the way to the US.”

He cites further problems with unstable legal jurisdiction and an opaque regulatory and bureaucratic environment.

Over-valued market

The case of alibaba.com suggests that the China market is over-inflated – priced at more than 100 times its worth. “This reminds us of March 2000 in the US when the dot-com bubble burst suddenly. But sources in China think the government will not allow the market to collapse until after the Olympics [in August], so it’s safe to play it until two months before that event,” he says.

Mr Banker adds: “History is littered with the carcasses of various precise market timers. ‘Murphy’s law’ will intervene as it did in August 1998 when too-big-to-fail nuclear Russia failed and dragged down Long-term Capital Management (LTCM).” The LTCM hedge fund folded in 2000 after Russia defaulted on debts, irregularities occurred and financial markets came unraveled.

Real estate

As if to prove he is taking his own investment advice, Mr Banker last year scooped up prime real estate in Sofia, Bulgaria – a penthouse for personal use.

He is refurbishing the ninth floor unit and enclosing its 10th floor roof area. The property has convenient underground parking and is located on busy Arsenalski Street opposite Sofia’s Citicenter Mall and Hilton Hotel.

The 1200 lev ($898) per square metre that he paid in 2006 is now worth 2000 lev per square metre, and that has been rising over the past three years. By comparison, the price is 8,000 lev per square metre for comparable accommodation in Hungary. So far, Mr Banker is very satisfied with his Balkan investments.

CURRICULUM VITAE

PRAVIN BANKER

2005

Balkan Capital Management

Partner 2002

Global Financial Network Inc

Executive director

1984Pravin Banker Associates Ltd

Founder

1979

IBM World Trade Corp

Director, international treasury operations for Latin America and the Far East