Veltchev Borthers, Spas Russev and VTB got tangled in the attempt to expressly master BTC

Originally published by PIK on June 10, 2016

The Telecom asked its shareholders for a permission the control over the company to be changed, but the agent under the bonds US Bank Trustees Limited is starting a profound inspection on who are the real new owners.

Milen and Georgi Veltchevi, Spas Rusev and VTB got into trouble in their attempt to expressly master BTC. On May 25th, the controlled by Veltchev brothers operational management of the telecom required from its shareholders to allow change in the control over the company. This was taken as a clear sign that the stalemate in which the war for BTC was is now over and the group around Milen and Geogri Veltchevi, Spas Russev and the Russian VTB are making a stubborn move to capture the ownership.

After three extensions of the period for reply on the behalf of the shareholders, BTC announced it had enough positive answers for the change, but it did not have the consent of the agent under the bonds US Bank Trustees Limited that started a profound inspection on who the real new owners are.

What does all that mean?

At least until June 13th, the group around Milen and Georgi Veltchevi, Spas Russev and VTB shall wait for the agent’s decision whether it could take the control over BTC. Why is the opinion of US Bank Trustees Limited so important? Because according to the BTC prospectus, the agent shall be responsible before the shareholders for the consequences of all the changes under the emission of BTC. Initiating a profound inspection practically means that the agent is in doubt whether the information, announced by the BTC is complete and above all – trustworthy.

What did BTC announce?

In its message to the Irish stock exchange, the Bulgarian telecom announced what is formally known as of November last year. That due to the failure to fulfil the obligation under bridge loan amounting to EUR 150 mln to VTB Capital, the collateral under it – 100% of the shares of the indirect owner of BTC, the Luxemburg company InterV Investment S.a.r.l. were acquired by another Luxemburg company – Viva Telecom, also owned by the Bulgarian investor Spas Russev.

What BTC did not announce and was in fact of extreme importance, was that Spas Russev was not the real and only owner of the acquiring company. Even more –there were representatives of the management of VTB Capital and the very VTB Capital among the buyers. The purchase, on the other hand, was performed by means of a credit, again from VTB Capital. And this places the investment department of the Russian bank in total conflict of interests.

Who would own what at BTC?

Yet, if the change of control was approved by the US Bank Trustees Limited, then it is most probable that we soon witnessed and the factual change in the ownership in BTC.

According to people who are acquainted with the deal, Veltchevi brothers, Spas Russev and VTB have negotiated a harmonious allocation of the ownership.

The greater part of the shares shall be divided between VTB Capital (20% minus 1 share), Delta Capital (19% of the shares), which, even though this was not mentioned in the BTC message, belongs to the top managers of the Bulgarian VTB – the brothers Milen and Georgi Veltchevi, and 46% of the shares of the company Viva Telecom, to which Spas Russev presents himself as an owner. According to publications in Russian print issues, it is practically controlled by a chain of off-shore companies, which in its end reaches to the managers of VTB capital.

Of similar allocation of ownership, as well as that the telecom goes to the hidden ownership of VTB, also speaks in a letter of his and the owner of Empreno Ventures – Dmitriy Kosarev, who acquired Tzvetan Vassilev’s share. In his letter to the US Bank Trustees Limited he quoted the Russian VTB bank for end owner of 85% of the Bulgarian Telecom. This causes serious problem, because the bank is under sanctions from the USA and the EU and has no right of acquisitions. Especially when it comes to a strategic for the national security asset in a country from the EU.

What would happen if Veltchev borthers, Spas Russev and VTB took the ownership in CCB without the shareholders’ approval?

This would hardly happen. The reason is that at a scenario like that the bonds could be presented earlier. And this would mean that BTC would have to pay almost the whole emission of EUR 400 mln (part of it the Telecom already bought back). As the company would not be able to find such amount, this would mean a new loan – most probably with source the VTB.

But it is quite probable the bank to disagree to go further in the BTC adventure. This way the change in control may be postponed for an unknown period of time, or the parties in the dispute – VTB Capital and Dmitriy Kosarev to find a way to solve the issue. Towards this moment, this seems very little probable.

What still amazes the most in this whole mess is the passive position of the Bulgarian official authority. Because 77% of BTC have been purchased with funds, originating from the CCB and it is normal to expect the Bulgarian authorities to do even what is impossible to take this share back in the mass of insolvency of the bank. Until this moment, however, such attempts not only are not to be done, but there is no indication anyone in the country to be interested in what happens to this asset. And still, it is about the biggest telecom in Bulgaria.