VTB Capital, Corpbank To Be 'Peers' in Bulgaria's Vivacom

Tsvetan Vassilev, chairman of the supervisory board of CCBank, is considered one of Bulgaria's richest men. Photo by BGNES

Bulgarian lender Corporate Commercial Bank and Russian VTB Bank plan to be peer partners in the debt-ridden Bulgarian telco Vivacom they have taken over.

"The Corporate Commercial Bank and VTB Capital, the Bulgarian subsidiary of VTB Bank, will be peer partners as far as the overall management of the company is concerned," Tsvetan Vassilev, chairman of the supervisory board of CCBank, commented for online edition LiveBiz.

It is still now known how the stakes will be shared out among the partners in the company.

"BTC creditors have approved the sale and loans terms and a lock up agreement has been signed with the London creditors to be in force until the final transfer of shares," said Vassilev.

He once again stressed that the new owners will angle for a strategic investor once the company is brought into better shape.

"Everything is possible. It is easy to see that neither we, nor the previous or current owners are strategic investors," Vassilev told LiveBiz.

The sale of the Bulgarian incumbent telco BTC, which operates under the brand name Vivacom, has been nearly finalized, it emerged on Tuesday.

Creditors of Bulgarian telco Vivacom , Bulgarian lender Corporate Commercial Bank and Russian peer VTB Capital have agreed on the terms for loan restructuring, the company announced in a statement.

The agreement lays down "the basic conditions of the sale and restructuring of BTC group, which will be implemented through a compromise scheme, to be launched this month," the statement reads.

According to the statement, if all preconditions are met and the deal is given the green light by regulatory bodies, it will be finalized next month.

The tie-in between Bulgarian lender Corporate Commercial Bank and Russian peer VTB Capital submitted a bid for the debt-ridden Bulgarian telco Vivacom two weeks ago and creditors accepted the offered terms a week later, according to insiders, cited by local media.

CCBank holds nearly half of the deposits by state-run companies and is widely known as the government's darling.

The deal is expected to be wrapped up in September.

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

BTC announced at the end of last month it has received notification from the Royal Bank of Scotland on the conditions for the sale of BTC to two financial investors.

The lenders were expected to hold restructuring talks, which aimed 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, CCBank and VTB Bank have offered to pay EUR 130 M in cash to senior lender for a majority stake, with EUR 588 M of reinstated loans, according to media reports.

A minority stake in BTC will be owned by the senior secured creditors.

If all options are exercised, senior lenders will be able to exit their loan positions after investors pay a total of EUR 617 M.

The price is a fraction of the EUR 1.4 B Turkey's Turkcell was reportedly willing to fork out for Vivacom earlier this year.

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, described the other two bids – by Bulgaria's Corporate Commercial Bank and Icelandic businessman Thor Bjorgolfsson - as too low, 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%. AIG was renamed PineBridge Investments ahead of its acquisition by Richard Li's Pacific Century Group (PCG) in 2010.

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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