The English High Court to consider a new claim challenging the VTB transaction concerning Vivacom

On 31 July 2018 V2 Investment Sarl (“V2”) filed a claim with the English High Court against Viva Telecom (Luxembourg) SA (“Viva Luxembourg”), a consortium led by VTB Capital.  In its claim V2 challenges the outcome of the auction resulted in the sale of a Bulgarian telecom company Vivacom at a gross undervalue to the purchaser affiliated with VTB and its managers.

V2 seeks to reverse the sale by VTB Capital of 100% shares in Vivacom holding company called InterV Investment Sarl (“InterV”) and to reinstate the previous shareholding structure over the telecom operator.

This claim is an additional new claim filed in context of the ongoing legal proceedings initiated by Empreno Ventures Ltd (“Empreno”) and LICT Telecommunications Sarl (“LICT”) against VTB Capital, Viva Luxembourg and VTB Capital-designated directors and nominees.

It is worth noting that in February 2018 the English High Court issued the judgement confirming the right of Empreno and LICT to continue their legal proceedings against VTB Capital Plc, an English 100% subsidiary of a Russian VTB Bank.

The legal ground of the claim was the rigged auction resulting in an unlawful sale of shares of a holding company (InterV) of a Bulgarian telecom company Vivacom to a consortium of investors led by VTB, which includes both VTB Bank itself and its managers, at more than three times less than fair market value.

The Court held that Empreno and LICT were precluded from reversing the sale of InterV shares in their individual capacities as Empreno and LICT are only indirect shareholders of V2, which was the pledgor of InterV shares.  However, the Court specifically indicated that V2 itself has the right to challenge the transaction as former owner of InterV shares.  This is exactly what was just done by V2.

Given the new claim of V2 and pending final resolution of the dispute, any attempt to sell Vivacom by its current shareholders pending resolution of V2’s claim, an onward sale of Vivacom by its current shareholders seems highly unlikely.

Empreno strongly urges any prospective investor interested in acquiring Vivacom from its current shareholders to diligently assess risks of purchasing the shares, which remain subject to ongoing legal proceedings.

 

 

The English High Court confirms Empreno Ventures Ltd’s right to continue proceedings against VTB Capital Plc for its fraudulent sale of Vivacom

EMPRENO VENTURES LTD SECURED ITS FIRST VICTORY OVER VTB CAPITAL PLC IN THE ENGLISH HIGH COURT. PROCEEDING AGAINST VTB FOR FRAUDALENT AUCTION ON SALE OF THE LARGEST TELECOMMUNICATIONS COMPANY IN BULGARIA VIVACOM TO CONTINUE.

The English High Court today delivered a judgement confirming the right of Empreno Ventures Ltd (“Empreno”) and LIC Telecommunications Sarl (“LICT”) to continue proceedings over VTB Capital Plc, a UK regulated bank and a wholly-owned subsidiary of VTB Bank.

To remind the ground for proceeding is the rigged auction process that led to the unlawful sale of shares in the leading Bulgarian telecommunication operator Vivacom to a consortium, which is led by VTB and includes VTB as a bank and VTB top officials, at a gross undervalue.

VTB and the other alleged co-conspirators were seeking to defeat the claims on a preliminary basis, asserting that the claims were not available to Empreno and LICT under Luxembourg law.  The tactics of VTB and other defendants failed.

This judgement of the English High Court became the first victory of Empreno and LICT beneficially owned by Mr. Dmity Kosarev over VTB Capital Plc.  Mr. Kosarev commented with respect to the judgement: “We are pleased that the Judge has said to VTB that it must now explain at trial what happened during this rigged auction, why it shut us out the way it did; why they strung us along; and why they allowed it be sold to themselves at a fraction of its true value.  We are now looking forward to the disclosure phase of the proceedings whereby VTB and its top officials will be obliged to open all its files, including email correspondence, explaining how they implemented the illegal hostile takeover of Vivacom, оf which I was the major shareholder”.

Empreno and LICT allege in their lawsuit against VTB and other defendants that the auction (based on the enforcement of a €150 mln loan held by VTB Capital Plc) was pre-ordained and that it involved a consortium led by VTB, including individual VTB top officials associated with VTB Bulgaria and VTB Capital Plc.  A VTB group company provided the debt finance for the “winning bidder” in the amount of €240 mln, at a significantly higher level of debt than the debt being enforced for repayment by auction.

The Vivacom shares were sold at auction to a VTB-led consortium at a gross undervalue, more than three times cheaper than their fair market value.

Prior to the rigged auction, LICT was a 43.3% shareholder in Vivacom.  Empreno ultimately owned 76.6% shareholding through its ownership of LICT and TC-IME, which held a 33.3% interest under a Total Return Swap agreement with Crusher Investment Limited. The VTB Bank’s wholly-owned subsidiary, Crusher Investment Limited, did not return the Vivacom shares to TC-IME, and continued to exercise its voting rights, which ultimately led to the rigged auction taking place.

Spas Rusev and VTB are not the legitimate owners of BTC (Vivacom)

RUSEV WAS REGISTRED AS A MEMBER OF THE SUPERVISORY BOARD UNDER UNPRECEDENTED POLITICAL PRESSURE 18 MONTHS AFTER THE FAKE AUCTION OF NOVEMBER 2015

Following the recent General elections in Bulgaria held on 26 March 2017, the company Empreno Ventures, which is the legitimate owner of 76% of the shares in BTC (Vivacom), is facing an unprecedented political pressure, which extended to the Bulgarian judiciary and the Bulgarian Commercial register.

The registration of Spas Rusev and the rest of the VTB-appointed directors at the Supervisory board of BTC (Vivacom) as a result of such political involvement doesn’t mean that Mr. Rusev is the legitimate owner of the company, as some Bulgarian media tries to speculate. Just on the contrary – VTB and Spas Rusev are absolutely desperate to take away as many millions as possible from BTC (Vivacom) until the courts and arbitration tribunals in London and Luxembourg reveal the scheme for their fake auction of November 2015.

Mr. Dmitry Kosarev, the owner of the company Empreno Ventures Ltd., who ultimately controls BTC, have notified the Bulgarian prosecutors and the State Agency for National Security about the recent activities of Mr. Rusev, whose funds for the acquisition of BTC (Vivacom) are of unknown nature and who has undertaken various activities in breach of the Bulgarian legislation. The competition clearance for the illegal BTC (Vivacom) deal of VTB/Rusev is still under appeal in the Bulgarian Supreme Administrative Court. He has notified the EU Commission and the Bulgarian Commission for Protection of Competition on the various competition law deficiencies that the BTC (Vivacom) deal of VTB/Rusev has.

“Over the last months I noticed a very positive tendency noticed in the Bulgarian society. Everybody in Bulgaria clearly realized that Mr. Rusev is a puppet of various political, shady masters. He broke the trust of the fans of one of the most respective Bulgarian football clubs – Levski. Rusev didn’t keep his word that he will quit being the owner of FC Levski, simply because he is a straw man of VTB and various political figures in Bulgaria. This will all be revealed very soon during our litigation and arbitration proceedings in the UK, Luxembourg, Bulgaria, Russia and others” - says Mr. Dmitry Kosarev.

From the next steps of VTB/Rusev/Veltchev brothers in Bulgaria the Bulgarian society will clearly evidence the real intentions regarding BTC (Vivacom) and the political support that these intentions are gaining on the highest levels. VTB/Rusev/Veltchev brothers will first attempt to sell under value the real estate of BTC (Vivacom), while in parallel trying to make BTC (Vivacom) pay for its own acquisition, which has criminal and civil consequences under the Bulgarian and the EU law.

The fact that VTB/Rusev/Veltchev brothers are receiving such political comfort given the fact that their under-value attempt to acquire BTC (Vivacom) is damaging the interest of the Corporate Commercial Bank insolvency clearly shows that there is the highest political protection over their illegal activities. As part of the international legal proceedings we are determined to clearly demonstrate the link between the Bulgarian political establishment and VTB/Rusev/Veltchev brothers.

Dmitry Kosarev regrets that the Bulgarian authorities do not interfere in this unprecedented situation when group of corrupted politicians and bankers are trying to steal largest telecommunication company from him - its legitimate owner.

Empreno: transaction with Vivacom is null and void

Empreno Ventures Ltd. (“Empreno”), a former legitimate owner of 76.6% interest in the holding company owning Bulgarian Telecom Company EAD (BTC) known as Vivacom, confirms completion of the sale of pledged 100% shares of InterV Investment S.a.r.l. (“InterV”), a Luxembourg holding company of the telecom operator, by VTB Capital Plc.  The completion of the sale is nothing but the next step in implementation of a fraudulent scheme orchestrated by VTB Capital Plc and a group of its top managers implementing a hostile takeover of Vivacom via sale of InterV shares significantly under fair value at a purported auction to a predetermined purchaser.  The transaction is null and void.  The purchaser Viva Telecom (Luxembourg) SA is not a legitimate good faith buyer of Vivacom. The title to the shares so “purchased” is clearly defective.

Empreno reminds that the transaction is challenged by Empreno in High Court of Justice in London, England.  The claim was brought against Viva Telecom (Luxembourg) SA, VTB Capital Plc, Mr. Milen Veltchev, Mr. Spas Rusev, Delta Capital and others. The relief sought in these ongoing proceedings includes the return of the shares and indemnification of damages. 

 

Extending a new €240-mln loan on 30 August 2016 proves that all previous representations of the bank that its only goal with respect to Vivacom transaction was to recover its earlier €150-mln bridge loan provided in 2013 were false to cover the real intentions of the bank to raid the company.  So called “open, competitive auction” was conducted with various significant violations and in a non-transparent manner, disregarding Empreno’s refinancing offer.  VTB Capital Plc acted in various conflicting capacities (creditor, pledgee, seller, buyer, bondholders consent solicitation agent and financier of the buyer) at the same time.  Bulgarian managers of VTB (Milen Velchev) who was in charge of the transaction and represented VTB in Vivacom structure board became a shareholder of Viva Telecom (Luxembourg) SA. It is only because of Empreno's actions and investigations that it was revealed that VTB were acquiring an equity stake, are funding the acquisition for the consortium, and was it not for the actions of Empreno all of these facts would never have been revealed. Empreno is confident that the litigation trial will reveal all the steps of the illicit conspiracy.

Empreno intends to continue the proceedings in the English court and other relevant jurisdictions as well as its ICC arbitration.

Empreno requires Vivacom to disclose risks of bonds acceleration and Vivacom insolvency

Empreno Ventures Ltd sent a letter to Bulgarian Telecommunications Company (BTC), known as Vivacom, reminding that the recent consent solicitation process did not result in obtaining an effective consent of the bondholders.  The consent as granted is expressly conditional, subject to, among other things, lack of proceedings (pending or threatened) and successful completion of KYC and anti-money laundering checks.  In the circumstances, these conditions cannot be satisfied. Therefore, there is no effective consent.

There are a number of ongoing legal proceedings challenging the validity of the amendments to the indenture governing Vivacom bonds and the recent consent.  Empreno launched proceedings in Bulgaria.  Empreno’s subsidiary LIC Telecommunications Sarl (LICT), a 43% shareholder of Vivacom, has recently filed a claim with the Luxembourg court. Empreno and LICT are also continue their legal proceedings against VTB Сapital plc and Viva Telecom (Luxembourg) SA, a proposed buyer of Vivacom, and others, challenging the transaction in the High Court of Justice in London, England.

Empreno raises concerns that in the absence of an unconditional consent if the acquisition of Vivacom is completed the bonds can be immediately requested for redemption by the bondholders at 101% pursuant to a change of control offer.  Given that Vivacom is not ready to refinance its bonds, which would otherwise normally become due in 2018, Vivacom will most likely default under the bonds, which will lead to insolvency of BTC.  Empreno requested that Vivacom management address the respective risks in the company’s financial statements.

Empreno urges to mind material omissions in Vivacom latest financial statements amid their publication made on Vivacom`s website

The publication of the financial statements of Bulgarian Telecommunications Company known as Vivacom raises serious concerns about the quality of such financial statements.

Empreno Ventures Limited takes a view that Vivacom's financial statements do not reflect in a true, accurate and non-misleading way the financial position of Vivacom. The accounts have material omissions:

  • shareholder structure of the company is not addressed correctly as the accounts are silent about dispute over 33%-shareholding in the ICC arbitration; Crusher Investment Ltd not being a legitimate owner of 33% equity in the company.
  • the legal proceedings launched by Empreno in the High Court of Justice in London, England, whereby Empreno is challenging the sale of 100% shares of InterV Investment S.a.r.l. are intentionally omitted.
  • the high risks of Vivacom insolvency if the sale to Viva Telecom (Luxembourg) SA is completed, given that the recent consent solicitation did not result in obtaining an unconditional consent from Vivacom bondholders.

The consent was granted as expressly conditional, subject to lack of any legal proceedings affecting the waiver and amendments to the indenture governing Vivacom €400,000,000 bonds due 2018. Now that these amendments and the waiver are being challenged in the ongoing legal proceedings recently initiated by Empreno, there is no effective consent of the noteholders to a change of control over the company. If the acquisition of Vivacom by Viva Telecom (Luxembourg) SA is completed, the noteholders can request their notes for early redemption. As Vivacom is not ready to quickly refinance the notes, which would normally become due in 2018, the company may go insolvent.

Empreno Ventures Files a Complaint with the Financial Conduct Authority regarding Inadequate Disclosures by VTB to Debt Holders of Vivacom

Empreno Ventures, the principal owner of Vivacom, the leading Bulgarian telecommunications company, filed a complaint to the Financial Conduct Authority voicing concerns of inadequate disclosures of information to the Vivacom debt holders by VTB Capital, a subsidiary of the Russian VTB Bank that might lead to financial decisions made based on non-complete information.

On May 25, 2016, Bulgarian Telecommunications Company EAD (BTC) launched consent solicitation process, which seeks a waiver from debt holders for change of control of the company.  Empreno has made numerous attempts to inform the debt holders and all related parties that the solicitation process might be taking place in violation of required disclosure practices and may be deceiving. 

Shall the decision take place, it might lead to accelerated debt and possibly bankruptcy of the company.  According to Empreno’s letter to the Financial Conduct Authority, the following risks must be fully accounted for:

— on-going legal proceedings concerning VTB Capital as co-defendant in Empreno’s claim in the High Court of Justice in London, England and other proceedings concerning the conduct of VTB Capital

— various conflicting capacities in which VTB Capital act in connection with the transaction involving Vivacom: VTB Capital acts as pledgee (seller) with respect to Vivacom shares, VTB Capital provides financing for the acquisition of Vivacom and participates in the consortium acquiring Vivacom shares.  Finally, VTB Capital also acts as solicitation agent in the consent solicitation process

— The issuer will face increased debt level;

— change in spending due to increased allocation of funds towards repayment of outstanding debts to VTBC;

— increased legal risks due to possible violations because the acquisition with the use of the BTC’ funds violates the regulations relating to the financial assistance under the applicable laws (art. 187e, para. 3 of the Bulgarian Commercial Act and the Second Company Law Directive 2012/30/EU);

— high risks of non-compliance with the EU Sanctions and U.S. Sectoral Sanctions due to the fact that VTB Capital together with its affiliates acquires control over Vivacom, VTB Capital parent, VTB Bank, is included in the US Sectoral Sanctions and the EU Sanctions lists.

Vivacom is the largest telecommunications company in Bulgaria and a former state-owned monopoly. It employs over 3,500 people and offers various telecommunication services, including fixed-line, mobile, internet, radio and TV broadcasting, and data transmission services. The company is headquartered in Sofia, Bulgaria. Its principal owner, Empreno Ventures, has filed complaints with the Serious Fraud Office and he High Court of London against VTB Capital for illegally taking control of Vivacom by deliberately prevented the owner from refinancing a 150m euro loan with the investment bank and having sold Vivacom at a knock down price to a connected party.

The copy of the letter and all appropriate supporting documents are published on Empreno’s official website emprenoventures.com

 

Empreno Ventures, a co-plaintiff in the action against VTB Capital plc over the hostile take-over of Vivacom, comments with respect to Change of Control waiver solicitation process

Empreno Ventures, a co-plaintiff in the action against VTB Capital plc over the hostile take-over of Bulgarian telecommunications company (Vivacom), issued a letter to UK-based U.S. Bank Trustees Limited, a trustee with respect to €400 mln Vivacom Eurobond issue, commenting on the waiver solicitation process in connection with a change of control launched by Vivacom last week.  VTB Capital, among its other capacities, acts as solicitation agent with respect to the said waiver request.

Vivacom is the largest telecommunications company in Bulgaria and a former state-owned monopoly. It employs over 3,500 people and offers various telecommunication services, including fixed-line, mobile, internet, radio and TV broadcasting, and data transmission services.  The company is headquartered in Sofia, Bulgaria. Empreno Ventures, has filed complaints with the Serious Fraud Office and the High Court of Justice in London against VTB Capital plc for illegally taking control of Vivacom by selling the company on an artificial auction under value.

With the letter Empreno informs U.S. Bank Trustees Limited that should the waiver requested by VTB Capital be granted, the issuer will face substantial risks.

According to the letter:

— The issuer will face increased debt level because the additional exposure on Vivacom is a part of the Vivacom acquisition financing package, although this may not be made sufficiently clear or disclosed with respect to the sought waiver for a change of control taken alone

— Change in spending due to increased allocation of funds towards repayment of outstanding debts to VTBC

— If a waiver for change of control is granted, the bondholders may soon face difficulties to resist granting a further consent to increasing the issuer debt level, even though this would be clear against their interests

— Increased legal risks due to possible violations because the acquisition with the use of the Issuer’s funds or any other form of financial assistance by the Issuer violates the regulations relating to the financial assistance under the applicable laws (art. 187e, para. 3 of the Bulgarian Commercial Act and the Second Company Law Directive 2012/30/EU)

— Significant compliance issues due to the fact that VTBC’s parent company, VTB Bank, is included in the US Sectoral Sanctions and the EU Sanctions list

The letter states:  We strongly urge you to thoroughly consider the Request from all angles mentioned above.  In our view, the holders of the Notes should be made aware that by giving their consent they would ratify the wrongful transfer of ownership over InterV shares to VTBC and otherwise participate in an illegal transaction violating the financial assistance rules and the US and EU Sanctions regime.

The copy of the letter and all appropriate supporting documents were sent to U.S. Bank Trustees Limited today and published on Empreno’s official website emprenoventures.com.

You can download scan of the letter here.