Creditors to Put Bulgaria's Vivacom for Sale Again in 1-2 Years - Report

Business | May 2, 2012, Wednesday // 13:37|  views

The creditors of Bulgaria's incumbent telco BTC, which operates under the brand name Vivacom, may be expected to put the company up for sale again no earlier than in one or two years, according to insiders.

"The collapse of talks for BTC sale means lenders will have to seek restructuring options for the debt-laden company and manage it themselves," Capital Daily reported, citing insiders.

According to the report the planned sale of Bulgaria's incumbent telco BTC failed after its creditors rejected the offers of all three bidders, including Turkcell, the biggest Turkish mobile-phone company.

The restructuring talks will aim at securing better terms and reducing the debt, which is burdening BTC, its parent company NEF Telecom Bulgaria and the holding company that owns NEF Telecom.

According to the report some of the subordinated non-performing loans may be transformed into equity capital, others restructured or even written down.

If the debt is reduced, in one or two years the company will be more likely to attract a quality investor and higher bids, the insiders said.

Royal Bank of Scotland, Deutsche Вank, Castle Hill, the European Investment Bank and Raiffeisen Zentralbank arranged EUR 1.3 B of loans to finance Vivacom 's 2007 buyout.

The mezzanine subordinated non-performing loans total EUR 400 M. The mezzanine lenders include French financial group AXA, Austrian investor Mezzanine Management, US Tennenbaum Capital Partners, Darby Overseas Investments, Deutsche Bank and Royal Bank of Scotland.

The creditors hired Morgan Stanley in London last year to help sell the company, after it breached the terms on the loan.

Last month Turkcell emerged as the most likely buyer of the Bulgarian telco, but the deal collapsed after the Turkish operator demanded that a huge part of the price (from EUR 100 M to EUR 200 M) is deposited in an escrow account until the state settles its scores with BTC previous buyers, Capital weekly reported, citing insiders.

The Turkish company reportedly put in a bid of over EUR 870 M.

Earlier reports said the Turkcell valued Vivacom at about USD 1.4 B, but the Turkish company described the potential bid amount in the media as "groundless".

BTC's creditors, who put the company for sale, have described the other two bids – by Bulgaria's Corporate Commercial Bank and Icelandic businessman Thor Bjorgolfsson - as too low, the insiders said.

According to the report there is still a slight chance for clinching a deal with Turkcell Iletisim Hizmetleri, but the odds of success have been set at mere 1-10%.

The creditors' decision is expected to be officially announced in a few days, according to the report.

Turkcell announced its decision to make offer for a 93.99% stake in the Bulgarian company, which operates under the brand name Vivacom, at the beginning of March in a statement to Istanbul Stock Exchange, becoming the only strategic investor in the tender.

Another three binding bids were submitted for Bulgaria's telecom Vivacom, but their amounts were not disclosed either.

Tsvetan Vassilev, the head of Bulgaria's Corporate Commercial Bank, and Icelandic businessman Thor Bjorgolfsson have made bids for Vivacom, heir to the state-owned Bulgarian Telecommunications Company (BTC).

The third bidder to meet the February 27 offer deadline was Pamplona Capital Management LLP, a London-based private equity firm.

The deadline for submitting binding bids, initially set at February 17, was extended by ten days at the request of Turkcell, who needed more time to take a definitive decision.

Vivacom - formerly known as the Bulgarian Telecommunications Company (BTC) - has gone through a number of controversial privatization deals.

The long-drawn-out and widely criticized EUR 230 M sale deal for 65% stake in Bulgaria's telecom operator BTC was sealed at the end of February 2004 after nearly two years of procedural predicaments, legal and political battles.

Months later Icelandic businessman Thor Bjorgolfsson bought Viva's stake for EUR 300 M and resold it to the investment company AIG Central Europe for EUR 1.08 B.

AIG Investments acquired 65% of the former state-owned telecommunications firm in May 2007. Then in August of the same year it upped its investment to 90%.

Chinese telecoms and media tycoon Richard Li, chairman of Asian telco PCCW, inherited control of Vivacom in March 2010 as part of the acquisition of AIG Investments, a unit of the troubled US insurance group which spans asset management and private equity investments.

The unit was renamed Pinebridge Investments ahead of the takeover by Li's Pacific Century group.

Dubai-based Oger Telecom was the closest to taking over the management of the company following negotiations that dragged on for nearly half a year. The deal however failed because the final offer was not satisfactory, according to insiders.

The nation of 7.7 million people has three mobile operators, which are foreign owned. Mobiltel is controlled by Telekom Austria, while Globul is the local unit of Greece's OTE.

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Tags: Pamplona, Globul, OTE, Mobiltel, Tsvetan Vassilev, Corporate Commercial Bank, Turkcell, turkey, Telekom Austria, Vivacom, Richard Li, Bulgarian Telecommunications Company, BTC, PCCW, AIG, Oger Telecom, Thor Bjorgolfsson


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