VTB Bank, Corpbank Set to Acquire Bulgarian Telco Vivacom

Business | July 30, 2012, Monday // 19:47
Bulgaria: VTB Bank, Corpbank Set to Acquire Bulgarian Telco 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 peer VTB Bank have agreed to take over debt-ridden Bulgarian telecoms company BTC, which operates under the brand name Vivacom, Russian media reported.

"CCBank and VTB Capital have agreed to form a tie-in and it will be picked as preferred buyer by the senior creditors' committee," Tsvetan Vassilev, chairman of the supervisory board of CCBank, told Russian newspaper Komersant.

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.

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

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 announced last week 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, have 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%.

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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Tags: CCBank, Thor Bjorgolfsson, NEF Telecom, lender, Russian, Bulgarian, PineBridge Investments, VTB Capital, VTB Bank, Bulgaria, mobile operator, Pamplona, Globul, OTE, Mobiltel, Tsvetan Vassilev, Corporate Commercial Bank, Turkcell, turkey, Telekom Austria, Vivacom, Richard Li, Bulgarian Telecommunications Company, BTC, mobile market

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