The state-owned Hungarian Development Bank Rt (MFB) violated its own investment policies when it bought a 42% stake in troubled holding company Ganz Transelektro Villamossági Rt (GTV) for Ft 4.9 billion in 2004, according to a report by the State Audit Office (ÁSZ), the daily Népszabadság reported on Wednesday.
MFB's investment strategy stipulated at the time that it could invest only in companies that had a good chance of operating profitably. GTV, however, had been loss-making for two years before MFB purchased the stake and many of its assets were being used as collateral for loans, the ÁSZ noted in its report. At the time, GTV's net assets were only about 87% of its registered capital, it failed to pay on time nearly three-fourths of its liabilities to suppliers and its debt-to-equity ratio was 88%. The ÁSZ noted as well that MFB's Ft 4.9 billion cash injection into the company was almost the same size as the company's Ft 4.7 billion principal due on loans in 2004.