VTB Capital, the investment banking unit of sanctions-hit Russian financial group VTB, has launched an immediate sale process for Bulgarian Telecommunications Company (BTC), which operates under the brand name Vivacom.

BTC, Bulgaria’s largest telecoms company by revenue, is likely to cut its ties with fugitive tycoon Tsvetan Vassilev, but will probably remain in the hands of a non-strategic investor 11 years after its privatisation.

State-owned VTB Capital is facility agent and security agent for a €150mn bridge financing loan extended in November 2013 by a syndicate of 10 banks, including VTB, to InterV Investment, a Luxembourg-registered holding company that indirectly owns BTC. The financing was secured via a share pledge over 100% of the shares of InterV.

InterV failed to repay the loan when it became due in May and “the lenders have since issued several consecutive standstill notices while they have investigated solutions to achieve repayment of the financing,” VTB Capital said in a statement emailed to bne IntelliNews on October 28.

VTB Capital has now hired a global advisory firm to launch the sale of BTC. The name of the advisor has not been disclosed, but according to Bulgaria’s Capital Weekly, it is Ernst & Young. The popular business weekly also alleges that VTB Capital had bought out the claims of the other nine banks before InterV’s default.

Ownership of BTC, Bulgaria’s communist-era fixed-line monopoly, has changed several times since its privatisation in 2004, and tracking its end-owner has been challenging. InterV currently owns 100% of BTC through two subsidiaries. VTB Capital has a stake of 33% in BTC via InterV and its subsidiaries, Vassilev has 43%, and a group of creditors led by Michael Tennenbaum holds the balance.

Vassilev fled to Serbia after his government-favoured bank, Corporate Commercial Bank (Corbank), collapsed in 2014. The Bulgarian tycoon had a close relationship with VTB Capital, which owned a 9.07% stake in Corpbank. However, after the deposit run in June 2014 VTB Capital said it would not provide liquidity or capital to the troubled lender and kept a low profile afterwards.

At end-March, Vassilev mentioned the €150mn bridge loan in an interview with Bulgarian daily Glasove, claiming that if it is not restructured, BTC would become 77% owned by the Russian state. He claimed that VTB has refused to communicate with him.

The comment was made a few days after Vassilev sold his 43% stake in BTC as well as majority stakes in five other Bulgarian companies to Belgian investor Pierre Louvrier, for the token price of €1. Louvrier also took on €900mn in debts. The Bulgarian authorities tried to block the deal, hoping to recover at least part of the BGN3.7bn (€1.87bn) paid to guaranteed depositors at Corpbank. However, in July, after the bridge loan was not repaid, Lovrier handed back the assets to Vassilev.

Milen Veltchev, a former finance minister in Bulgaria’s Saxe-Coburg-Gotha government (2001-2005) and the current head of VTB Capital’s local unit, commented in the October 27 statement that, “VTB Capital plc acted appropriately and in accordance with our professional responsibilities and legal obligations throughout this process … We are confident in recovering the amount owed. Vivacom remains a robust business with solid financials and healthy balance sheet."

According to the investigation by Capital Weekly, four bidders filed offers for BTC with Ernst & Young before the deadline expired last week. They are VTB Capital, Bulgarian businessman Spas Rusev, who reportedly set up the technocratic cabinet under Simeon Saxe-Coburg-Gotha, Austrian investor Ronny Pecik, and Mark Schneider, the co-founder of leading European cable group UPC. The bidders had to make their offers without the opportunity to carry out due diligence on BTC, which probably reduced the appetite of potential strategic investors, the weekly claims.

BTC is still the largest player in the fixed-line segment in Bulgaria. It is also the third largest mobile operator. In 2014, BTC posted a net profit of BGN26.3mn on revenues of BGN805.9mn.