Latvia's Slakteris Says Parex Is Interested in State Guarantee

By Aaron Eglitis

Nov. 8 (Bloomberg) -- Latvian Finance Minister Atis Slakteris said Parex Banka AS, the Baltic country's second- biggest lender, may tap a government program to provide state guarantees for loans.

``Parex Banka has shown interest and approached us about this possibility,'' Slakteris said in an interview late yesterday with the LTV1 news show Panorama. Hipoteku Un Zemes Banka AS, the only state-owned lender, may also need to apply, he said.

Latvia's government is offering state guarantees for loans to ease funding pressures for local lenders, who fund operations with syndicated loans, after the Swedish government offered a similar program that covered Swedish subsidiaries in the Baltic states. Latvia's central bank said Nov. 3 that about 1.2 billion euros ($1.53 billion) in syndicated loans come due next year.

``At the moment borrowing in the global financial markets is almost impossible without a state guarantee,'' Slakteris said. About eight Latvian banks have to repay syndicated loans, he added.

Martins Jaunarajs, a senior vice-president for Parex Banka, declined to comment on whether his bank was seeking a guarantee when contacted by phone today. Parex has syndicated loans of 775 million euros that need to be refinanced next year, Jaunarajs said.

The government may decide at a meeting today on state loan guarantees for a local lender and steelmaker Liepajas Metalurgs AS, which wants a guarantee for 160 million euros, the Leta newswire reported yesterday, without saying where it got the information.

Three of Latvia's five biggest lenders are Swedish-owned so can drawn on the government plan in Sweden.

`Peculiar Situation'

``It's a peculiar situation where those banks that have a parent company, for example in Sweden, they have support, but those that do not have parent banks, they do not,'' Slakteris said. ``That's why Latvia has acted just like other European countries.''

Moody's Investors Service yesterday downgraded Latvia's credit rating to A3 from A2, the third-lowest investment grade level, saying the state may have to offer assistance to some locally owned institutions.

Domestic demand is waning as the Baltic country's economy contracted a preliminary 4.2 percent in the third quarter, compared with an expansion of 10.3 percent last year.

To contact the reporters on this story: Aaron Eglitis in Riga, Lia, at aeglitis@bloomberg.net