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torek, 7 decembra, 2021

The Frightening Indifference of Certain Slovenian Banks in Granting Loans: What Will Happen If the Social Democrats Have to Return the Stolen Real Estate?

By: Sara Bertoncelj / Nova24tv

In light of the Social Democrats party (SD) obtaining loans from the Delavska hranilnica bank (Workers’ Savings Bank) and the related reactions of our readers, this seems to be a good time to shed some light on the financial situation of the Social Democrats party. All recorded findings and assumptions presented in the following article are based exclusively on publicly available data, which must – in accordance with the law – show the true state of operations of every entity, including the SD party. To begin with, it should be pointed out once again that the SD part got all of its real estate without having to invest so much as one euro. Namely, the party acquired the real estate as the successor of the Communist Party of Slovenia. Therefore, the SD party did not record any expenses from the acquisition of real estate. Consequently, the acquisition was not, and still is not, burdening the party’s financial statements. The SD party, therefore, recorded only a positive result in the acquisition of real estate, which is, of course, still reflected in their balance sheet today.

It is now impossible to say exactly where the SD party recorded the value of the acquired real estate among its liabilities, but we can assume that at least part of it is recorded in the item “Founding contribution.” The party, which, of course, does not have any owners who could pay the founding contribution or capital, has the amount of 401,862.02 euros recorded in this category. This is certainly a high amount, which could otherwise also fully reflect the value of the real estate contribution. Since we can all imagine that buying a property in the life cycle of any entity is one of the biggest investments, acquiring a property without paying a cent is a really great gift. The SD party is a political party that has a really long history. So, these are not some “newbies,” and consequently, all legal provisions of business operations must not and cannot be something foreign to them. Since the SD party obtained most of its loans in 2018 from the Delavska hranilnica bank, we will also take a closer look at the business years 2017 and 2018 for the purposes of business analysis and credit ratings. The SD party’s operations in 2018 were also reviewed by the Court of Audit in 2020. So, one would assume that there should be no surprises here. However, that is not true, as we will show below.

In the year 2018, the SD party received loans in the amount of 600 thousand euros from the Delavska hranilnica bank, which we have already previously reported on. The loan of 100 thousand euros is a revolving loan, meaning that the party can borrow and return the money as it pleases, according to its needs and capacities. The data published on the public web portal AJPES show that at the end of 2017, the SD party had 401,822.05 euros of financial liabilities, and at the end of 2018, it had 536,402 euros. As the SD party received a loan in the amount of 600 thousand euros from the aforementioned bank in the year in question, according to the publicly available data, it apparently used part of it to repay the previous long-term loans and then borrowed an additional 134,579.95 euros.

Where did the 63,598 euros that should have been recorded in the SD party’s financial statements at the end of the year 2018 disappear to?
According to the data from the Land Register, it could be concluded that this is the amount of the long-term liabilities from loans taken out with the Delavska hranilnica bank, as in the same time period, the party only has 6,463.35 euros of short-term financial liabilities recorded in its balance sheets in 2017, and in 2018, it has 560.34 euros. Where did 63,598 euros of long-term liabilities disappear to in the SD party’s financial statements at the end of 2018? Among the short-term ones, where long-term liabilities that fall due in less than 12 months could also be managed, there are none – as the amount is significantly too small. If we take into account that this is a linear repayment loan, then 120 thousand euros should be recorded among the short-term financial liabilities.

How did the Court of Audit manage to overlook a loan of 100 thousand euros?
If we add the report of the Court of Audit on the operations of the SD party in the year 2018 to this, we come to a new anomaly. Namely, the Court of Audit or its President Tomaž Vesel confirmed that the SD party only has 500 thousand euros (item 2.4 of the report of the Audit Committee of the 7th of July 2020). So, there is complete confusion here, and it really cannot be argued that from all the publicly available data, it is possible to deduce what the actual indebtedness of the SD party is. There is also a legitimate doubt in the report of the Court of Audit regarding the regularity of the operations of the political party of the Social Democrats in 2018. How did the Court of Audit manage to overlook the 100,000-euro loan that the SD party took out from the Delavska hranilnica bank in 2018?!

How come the Bank of Slovenia missed the fact that this is an entity with negative capital?
We can also see among the SD party assets that the party only has tangible fixed assets specified among the long-term assets, and a given loan among short-term assets, which has been recorded every year in the same amount since the year 2016, which indicates that this can no longer be considered a short-term loan. Given that the repayment has been dragging on for so long, the SD party should, in accordance with the accounting standard, keep the amount among the long-term ones and at least check the probability of repayment and form an appropriate correction. Among liabilities, the SD party has -279,971.35 euros of its own resources recorded at the end of 2017 – which would mean negative capital in corporate jargon – and a deficit of 639,922.93 euros at the end of 2018. In general, in the financial industry, it is considered that entities with negative capital are not financed. And the question is, how come the Bank of Slovenia missed this fact if the Delavska hranilnica also overlooked it before? At the end of 2017, the SD party recorded losses of -763,846.49 euros. This certainly shows in the aforementioned own resources. However, the founding contribution is also taken into account there, which is probably a real contribution in the form of real estate. If we take these gifts out of the statements, it is quite clear that the state of the SD party is even worse in reality.

The SD party’s operations are financed solely by suppliers and banks
At the end of 2017, the SD party still had 405,350.90 euros of long-term operating and financial liabilities, and at the end of 2018, this sum amounted to 538,237.94 euros. To this debt, an additional 217.282,43 euros of short-term operating and financial liabilities were added at the end of 2017 and 390,718 euros at the end of 2018. From this, it is more than obvious that the SD party’s operations are being financed only by suppliers and banks. The party itself has been generating operating losses for a long time now. This fact is also confirmed by the data on retained losses in previous years (and not on retained earnings). And no one has any comments on these financial statements?! Neither the Delavska hranilnica bank nor the Bank of Slovenia as a regulator (remember the year 2008 and the collapse due to bad loans?), and not even the Court of Audit.

For first-class citizens, the banks obviously have different criteria when granting loans
In order for the Delavska hranilnica bank to be able to justify the facts mentioned above, which practically prohibit it from financing such an entity, let us also take a look at the income and expenditure side of the SD party’s business operations. Once again, we will focus on the years 2017 and 2018. In 2017, revenues amounted to 716,874.42 euros, and then the party generated a total of 7,505.95 euros of surplus – i.e. profit, and in 2018, 1,020,693.22 euros of revenue and -359,951.58 euros of surplus of expenditure over revenue – i.e. losses. And based on these financial statements, the Delavska hranilnica bank decided to give out a loan to the SD party?! Anyone who has ever dealt with a financial institution knows that something like that is practically not possible in the real world. Consequently, we can conclude without any doubt that the loan was obtained in an extremely dubious way. However, all regulators are turning a blind eye to this.

In light of revenues, it should also be emphasised that in 2017, the SD party received only 10.9 percent of its revenue from non-political activities, and in 2018, only 6.8 percent. Given that the political party’s revenues, for at least four years in office, are fairly easy to plan, the negative performance of the SD party is certainly a reflection of great inefficiency and defeatist planning. The Delavska hranilnica bank clearly did not notice all of this when it approved the loan in an amount which the SD party can in no way repay from its business, as it does not generate as much free cash flow.

Finally, there are some additional concerns. What would happen if the SD party had to return the nationalised property? In that case, the Delavska hranilnica bank would lose its insurance entirely. What then? In this particular case, is it really a loan that was granted on the basis of the necessary diligence of the bank? Will this loan eventually be repaid by the taxpayers – which is what happened last time as well, due to the effects of the 2008 financial crisis? The memory of this has not faded yet, so the indifference of the Delavska hranilnica bank, and especially the Bank of Slovenia, is really frightening in this case.

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