Former prime minister Ivan Kostov has stirred up further controversy on the Brady bond swop with a letter urging his successor Simeon Saxe-Coburg to call off the deal.

Kostov, a United Democratic Forces (UtDF) MP, said last Friday he expected Saxe-Coburg to call off the deal on the exchange of Bulgarian Brady bonds for Eurobonds, irrespective of Parliament's approval.

According to Kostov, the deal is favourable only for the investors in the bonds, and not for Bulgaria, given current market conditions.

"I share the view that Bulgaria should step on the free credit market and service its foreign debt alone and stop counting on the continuous support of the international financial institutions. This should happen by defending the Bulgarian national interests and not the interests of Bulgarian Brady bonds owners," Kostov said.

Bulgaria had turned down numerous offers for such deals in the past, he said.

Kostov said he believed that when Saxe-Coburg familiarised himself with the arguments in his letter, he would call off the deal.

In the letter, Kostov said the UtDF government used to purchase, confidentially and carefully, bonds at a price of 75 to 76 cents a dollar, and thus reduced the debt by some $200 million. Now this would be done at 92 cents a dollar, he estimated.

According to him, at the current LIBOR rates, Bulgaria pays some $33 million in interest for $1 billion in Brady bonds. After the exchange of $920 million in new bonds, the country will pay some $67 million in interest.

Finance Minister Milen Velchev and his deputy Krasimir Katev denied Kostov's allegation that the swop would be unprofitable.

"If the deal is stopped, Bulgaria's international image will be badly shaken," Katev said.

Velchev said experts in Bulgaria and abroad were unanimous about the benefits of the operation, and it was generally known how Bulgaria would benefit from it.

"Without usurping the prime minister's right to express his viewpoint, I can only say that the operation has his unqualified support, voiced even before the matter was tabled in Parliament, and we are resolved to carry on in order to modernise the management of Bulgaria's foreign debt," Velchev said in an interview with Bulgarian National Radio.

"It is known whose interests Kostov defended in the last few years. They certainly were not the national interests, but his own and his family's. He is the last person entitled to level accusations at us, claiming that we are defending special interests other than the national ones," Velchev said.

President Georgi Purvanov held Saturday a working meeting with former finance ministers, experts, MPs, bankers and lawyers to consider the debt swop. According to Purvanov, the discussion would have been very useful, had it been held prior to the ratification.

On Monday, Purvanov announced he would not veto the act ratifying the agreements for the debt swop.

Purvanov's press office said the president shared the opinion of experts that such an operation should have been initiated earlier. He believed that it should not be stopped and that the Government's team of financial experts should seek possibilities for achieving the optimum results. The negative consequences of a veto on the agreements and a delay of the already launched operation would be too serious for the Bulgarian economy, especially from the point of view of possibilities for future refinancing, Purvanov's office said.

The parallel presentations of the new issue of Bulgarian Eurobonds started on Tuesday and were scheduled to be held in New York, London, Frankfurt and Boston.

Issue managers JP Morgan and Salomon Smith Barney told the ministry they had received subscriptions for 1 billion euros. The bonds were in demand by German, British, Italian, Bulgarian and Greek investors.