Local businessman wins controversial tender for Bulgaria’s biggest telco BTC

Local businessman wins controversial tender for Bulgaria’s biggest telco BTC
By Siana Mishkova November 21, 2015

Bulgarian businessman Spas Roussev is likely to assume full control of Bulgarian Telecommunications Company (BTC), the country’s largest telecom operator by revenue, after winning a controversial tender for its ultimate owner, Luxembourg-registered InterV, with a €330mn bid.

The completion of the deal is still uncertain as InterV shares have been frozen by a court injunction requested by the Bulgarian authorities, while an obscure Russian investor, who claims to own a majority stake in InterV, vowed to fight for his “stolen” equity stake by all possible legal means.

The sales procedure for BTC, which operates under the brand name Vivacom, was launched by VTB Capital, the investment banking unit of sanctions-hit Russian financial group VTB, in late August, after InterV failed to repay a €150mn bridge loan, which matured in May. The financing was secured via a share pledge over 100% of the shares of InterV, which owns 100% of BTC through two subsidiaries.

VTB Capital said in a statement that it hired Ernst & Young to manage the sale and after contacting “dozens of potentially interested parties”, providing confidential information to “a significant number”of them, and receiving an undefined number of purchase offers, it scheduled the final auction for InterV for November 19 in London. The qualifying bidders admitted to the tender procedure were Roussev, who has a close relationship with the head of VTB Capital’s Bulgarian unit Milen Velchev, and Greek Olympia, owned by Panos Germanos, the former CEO of the Germanos retail chain, in a consortium with US hedge fund Third Point.

“The auction lasted for more than 12 hours and included in excess of 25 rounds of intensive competitive bidding,” VTB Capital said in the statement. “Completion of the sale with the winning bidder is subject to the signing of legal documentation.”

Corpbank links

The minimum amount VTB Capital has to recover is some €180mn – the defaulted loan plus interest and fees. The achieved premium of €150mn is expected to be distributed among InterV’s shareholders, which include fugitive Bulgarian tycoon Tsvetan Vassilev, who is accused of having siphoned billions of euros from Corporate Commercial Bank (Corpbank), Bulgaria’s fourth biggest lender until its collapse in 2014. Vassiliev has a stake of 43.3%, while VTB Capital holds 33.3%, and a group of creditors led by US financier Michael Tennenbaum hold the remainder.

However, it is not yet clear how the winning bidder will unblock the shares of InterV, which the Bulgarian state froze earlier this year as part of its efforts to recover at least part of the BGN3.7bn (€1.87bn) paid to guaranteed depositors at collapsed Corpbank. Allegedly, Vassilev paid for his stake in BTC with the proceeds from a credit from Corpbank that was never returned. So, the state is quite likely to ask for sizeable compensation in return for lifting the injunction on InterV’s shares.

Unblocking InterV’s shares could face another hurdle though.

Too many shareholders

As the puzzle unfolded, Dmitri Kosarev, a Russian businessman, reportedly linked with sanctions-hit Russian billionaire Konstantin Malofeev, declared himself a majority owner of BTC, claiming he had acquired Vassilev’s 43.3% stake and also insisting that he is the rightful owner of VTB Capital’s 33.3% stake.

In a statement emailed to bne IntelliNews, Kosarev claims he has initiated arbitration proceedings at the International Court of Arbitration of the International Chamber of Commerce in France regarding the actual ownership of the 33.3% stake. Moreover, the shares of InterV have been blocked by Luxembourg prosecutors in relation to a probe launched on November 18 on the request of his company Empreno Ventures, Kosarev states.

“By arranging the sale of the asset, VTB Capital is consciously and intentionally breaking the law, as it knows that 100% of Vivacom’s shares are under injunction in Luxembourg,” Kosarev said. “This is a serious blow to the image of the whole VTB Group, active outside of Russia, about which we have warned VTB’s president Andrey Kostin,” he added, arguing that VTB’s western partners would assume that it encourages the breaking of international laws.

BTC’s potential new owner

The post-privatisation history of BTC, Bulgaria’s communist-era fixed-line monopoly, has been mired in controversy, as its ownership has changed several times since its sell-off in 2004, and tracking its end-owner has been challenging.

Roussev is known mostly for his close relationship with Simeon Saxe-Coburg-Gotha, Bulgaria’s last tsar and its prime minister from 2001 to 2005, and some of his yuppie ministers. Milen Velchev, who was finance minister in Saxe-Coburg-Gotha’s cabinet (2001-2005), now heads the Bulgarian unit of VTB Capital. His brother, Georgi Velchev, is member of BTC’s supervisory board.

The trio has been accused by Kosarev and others of trying to buy and sell BTC cheaply now and later resell it, free from all burdens, at a substantially higher price. This was described as a “daylight robbery ... made possible by the complacent Bulgarian institutions,” by Ilian Vassilev, Bulgaria’s ambassador to Russia from 2000 to 2006.

“The bill will be paid by the Bulgarian taxpayers,” Vassilev wrote on his Facebook page, hinting that it will be virtually impossible for the state to recover any of the billions drained by Tsvetan Vassilev and his allies.

Meanwhile, BTC is performing relatively well, remaining the largest player in the fixed-line segment and the third largest mobile operator after Telekom Austria's Mobiltel and Telenor Bulgaria. However, it is highly indebted with a debt-to-equity ratio of 266% and a debt-to-assets ratio of 79.7% as of end-September.