* Fund sent letter to Bulgaria for talks: Oman honorary consul
* Outcome of talks unclear: Oman honorary consul
* Shareholder intervention “unlikely”: Bulgaria PM
* Bulgaria CDS at 15-month high
* Stock exchange extends freeze on Corpbank trades (Adds CDS move, trade ban, details, background)
By Tsvetelia Tsolova
SOFIA, June 25 (Reuters) - Oman’s sovereign wealth fund held talks with the Bulgarian government and central bank on Tuesday about recapitalising Corporate Commercial Bank (Corpbank) , Oman’s honorary consul in Sofia told Reuters on Wednesday.
His comment was the first indication of the Oman fund’s response to the crisis at Corpbank, which was hit by a run last week after depositors became unnerved by reports of shady deals involving the lender and its main shareholder.
The sovereign wealth fund is Corpbank’s second-biggest shareholder, with a stake of about 30 percent.
Already reeling from a drubbing at the European Parliament elections in May, Bulgarian Prime Minister Plamen Oresharski’s government has announced plans to nationalise Corpbank if its existing shareholders do not rescue it.
The crisis has put renewed attention on the investment climate of the European Union’s poorest member state, which has been plagued by political instability and endemic corruption, and suffered a sovereign credit rating downgrade in June.
The fall-out from the bank run continues to be felt in international markets, with Bulgaria’s credit default swaps (CDS) at a 15-month high, according to Markit data.
Nationalising Corpbank looked the most likely outcome after Oresharski said on Tuesday that shareholders were unlikely to rescue the country’s fourth-largest lender.
It was not known whether he was speaking before or after the meeting with the sovereign wealth fund.
“Talks took place yesterday, but I do not know the outcome,” Oman’s honorary consul Stoyan Denchev told Reuters on Wednesday.
Another shareholder, Russian bank VTB, said on Tuesday it had no plans to inject capital into Corpbank.
Bulgarian businessman Tsvetan Vassilev owns just over half of the company, while the investment arm of VTB is the third-biggest shareholder with a 9.1 percent stake.
Both Corpbank and Vassilev have denied any wrongdoing. It is not known whether Vassilev himself could provide additional funds for the lender.
The Oman fund, which has not publicly commented on its intentions regarding Corpbank, had earlier sent a letter to Bulgarian authorities about holding talks to protect its interest in the lender, the consul said.
The fund did not respond to repeated requests for comment. The central bank declined to comment on the consul’s remarks on Wednesday.
Corpbank’s problems prompted ratings agency Moody’s to downgrade it by two notches on Tuesday. Bulgaria’s stock exchange on Wednesday announced it would extend a freeze on share trading in Corpbank until the central bank relinquished control over its operations.
The central bank, which said it would handle Corpbank’s operations for three months after the run last week, has begun delving into the lender’s accounts to find out what went wrong and has appointed independent auditors to determine how much money Corpbank will need.
It has said Corpbank is not bankrupt, that its problems are an isolated case and that they pose no risk to Bulgaria’s banking system.
The crisis hit Bulgaria just as the government was gearing up for a European investor road show to raise 1.5 billion euros from bond sales. The money is needed to roll over bonds maturing in January and finance the budget deficit.
Early talks with investors in Germany - the first leg of the road show - suggested Corpbank’s problems and the recent downgrade by Standard & Poor’s to one notch above junk would not derail the sale. (Writing by Matthias Williams; additional reporting by Carolyn Cohn in LONDON; Editing by Erica Billingham and Pravin Char)