Russian State Dubbed Actual Buyer of Bulgarian Telco Vivacom

Bulgarian incumbent telco BTC, which operates under the brand name Vivacom, was eyeing a Turkish new owner earlier this year, but the sale deal failed. File photo

Bulgaria's incumbent telco BTC, which operates under the brand name Vivacom, will practically remain a state-owned company even after its sale to local lender Corporate Commercial Bank and Russian peer VTB Bank, an expert argues.

"If this sale is wrapped up, BTC privatization will be practically delayed once again. Former owner AIG and Royal Bank of Scotland, a coordinator of the steering committee of BTC senior secured lenders, were urgently acquired by the American and English governments some time ago. The new owner, in its turn, will be controlled by the Russian government. In other words BTC will continue to be state-owned," Antoni Slavinski, chairman of the Telecommunications association, told Trud daily.

Slavinski however declined to confirm or deny reports that the tie-up between CCBank and VTB Capital has already been picked as preferred buyer by Vivacom senior creditors.

Hong Kong telecoms and media tycoon Richard Li's PineBridge Investments currently owns a 94% stake in Vivacom, while the rest is floated on the Bulgarian bourse.

BTC has received notification from the Royal Bank of Scotland on the conditions for the sale of BTC to two financial investors, BTC said last week on the website of the Stock Exchange.

Now the lenders are expected to hold restructuring talks, which 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.

Under the proposed restructuring, investors will provide EUR 130 M to the senior secured creditors against the majority stake. A minority stake in BTC will be owned by the senior secured creditors, according to media reports.

If all the options are used, senior secured lenders will be able to fully repay their stake in BTC for a total of EUR 617 M.

Meanwhile Tsvetan Vasilev, chairman of the supervisory board of CCBank, told Bulgarian newspaper Capital Daily that Bulgarian lender Corporate Commercial Bank (CCBank) and Russian peer VTB Bank are set to take over debt-ridden Bulgarian telecoms company Vivacom.

VTB Capital, a VTB Bank subsidiary, declined to comment.

The 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.

In April 2011 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.

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.

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.

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