bne -

A happy ending of sorts looks possible for Latvia's notorious Parex bank with the announcement on November 11 that the Latvian Privatization Agency has approved a list of potential investors in Bank Citadele - as the "good" bit of the former Parex is now known.

While that's good news, it's also thin news - the number of interested parties and the sort of offers they are making to take control of Citadele remains shrouded in confidentiality agreements while consultant Nomura chivvies the bidding process along.

Whoever they are and however much they are prepared to pay won't be revealed anytime soon either, as so far only indicative offers have been tabled. Bidders proceeding to the next stage will get stuck into their due diligence and - as long as they don't uncover anything too scary - submit their final, binding offers in the coming months.

The Latvian government will then decide whom to choose by May 2012, though hopes are high in official circles that a deal might be completed in the first quarter. The European Bank for Reconstruction and Development, which holds 25% of Citadele shares, will also want to have a say.

Before then, however, Citadele will have to repay €93m to state coffers that it still owes from the money the government pumped in to keep it afloat. Since Citadele went operational in August 2010, it has repaid €110.5m (plus a cool €23m in interest) of the total term deposit invested by the government of Latvia. "It is important to have a stable long-term investor to make investments in the bank's development and the development of its products and services. Citadele is working with profit, and the bank achieved better results during its first activity than anticipated in the restructuring plan," bank spokeswoman Ieva Praulina tells bne.

In late 2008, the Latvian government took over Parex Bank, which was the second largest bank in the country, to prevent its collapse. The rescue effort ended up costing more than €1bn and was instrumental in forcing Latvia to seek a €7.5bn bailout from the EU, IMF and World Bank.

In March 2010, it was agreed to split Parex into a going concern (Citadele) and a rump "bad bank" with the old name to handle bad assets.