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.

Former CEO of TC-IME AD Teodora Taneva faces 74 million EUR claim as Veltchev's plan to illegally acquire BTC collapses

The former CEO of TC-IME AD Mrs. Teodora Taneva, who illegally continues to hold office and signs documents in breach of her legal and fiduciary obligations, has received a statement of claim for 74 million EUR filed with Sofia City Court from the shareholder who dismissed her some years ago.

Mr. Dmitry Kosarev, the owner of the company Empreno Ventures Ltd., who ultimately controls BTC, had initiated various litigation and arbitration proceedings against VTB in London, Vienna, Luxemburg and Moscow, as VTB continues to illegally retain 33% of BTC.

Milen Veltchev's plan to acquire BTC at a third of its market value is stuck in several legal disputes, which now continue with this fresh case filed in Sofia.

«Mrs. Taneva's behavior and actions directly harm the interest of the shareholders and ultimately – the interest of the Bulgarian State, and are subject to civil and criminal liability», says Mr. Kosarev. «We are determined to defend our interest as shareholders and will not allow a former manager to harm us in breaching every essential fiduciary duty and act blatantly against the interest of the company».

Despite of the valid corporate decisions for her dismissal as a CEO of TC-IME AD, Mrs. Taneva continued to sign documents in breach of her duties and against the interest of the company, and will be held liable. Similarly Mr. Milen Veltchev has engaged personal legal representatives in the ongoing case before the High Court of England and Wales related to the fraudulent plan for the takeover of BTC from VTB.

The first hearing of the Taneva civil liability case is about to be scheduled by the Sofia City Court in the coming days.

 

The Evening Standard Covers Empreno's Legal Action against VTBC

UK subsidiary of Russian State Bank VTB reported to Serious Fraud Office over Vivacom sale

Principle shareholder in Vivacom suing VTB Capital for over $160m

The owner of the largest Bulgarian telecommunications company Vivacom has reported VTB Capital, the UK arm of the state owned Russian bank, to the Serious Fraud Office for the alleged illegal seizure and sale of the company to a connected party.

The criminal complaint was filed with the Serious Fraud Office on Friday by lawyers representing Empreno and LICT and their owner Dmitry Kosarev, who is the principle shareholder in Vivacom.

In a separate legal action Mr Kosarev is suing VTB Capital in London for damages in excess of 143m euros for allegedly selling Vivacom for a price that significantly under represented the true value of the company.

According to the SFO complaint, VTB Capital dishonestly seized LICT’s shareholding in InterV Investment Sarl (InterV), a parent company of Vivacom, by conspiring with a third party to block the owners’ access to the company. Individuals named in the SFO complaint include Mr Nick Hutt (CEO of VTB Capital plc), Mr Alexei Yakovitsky (Global CEO of VTB Capital and CEO of VTB Capital Holding (Russia)) and Mr Yuri Soloviev (Deputy Chairman of the Management Board of JSC VTB Bank and Chairman of the Board of Directors of VTB Capital Holding (Russia)).

After effectively taking control of the company, VTB has quickly started the process of selling it to an affiliated party at a grossly undervalued price, thereby resulting in substantial financial detriment to the rightful owners.

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.

The SFO complaint alleges that VTB Capital deliberately prevented InterV from refinancing a 150m euro loan with the investment bank. It then allegedly sold InterV’s shares in Vivacom, which had been used as security on the loan, at a knock down price to a connected party – and in doing so breached a stand-still agreement.

VTB Capital made an attempt to sell the share of the company to an affiliated individual, Spas Rusev, a prominent Bulgarian businessman. Mr Kosarev believes that the sale is being conducted via a sham auction process without proper notification and in an effort to conceal the sale while blocking other bidders and ensuring that Spas Rusev is able to get the company far below market value.

According to the filing with the Serious Fraud office:

- No proper or sufficient attempts were made to publicise the purported auction so as to attract a reasonable number of interested bidders

- VTB Capital specifically and persistently refused to provide Empreno and LICT with information to enable it to refinance their loans with VTB Capital and to participate in a bid for the InterV shares.

- No proper or sufficient period of notice was allowed before the purported auction to enable interested bidders to prepare and carry out reasonable due diligence.

- The winning bidder, Spas Rusev, is a connected party and a long-standing associate of VTB Capital.

- The ultimate sale price of €330 million agreed for the InterV shares grossly undervalued the shares and represented a substantial reduction of €143 million to the competing bid by CVC Capital Partners Limited. 

- VTBC has obstructed the steps taken by Empreno to investigate its misconduct by persistently refusing to disclose relevant information and documents.

Authorities in Russia are also looking into starting a criminal investigation against unidentified subjects in connection with the sale of Vivacom. However as VTB Capital plc is a UK regulated bank, Empreno and LICT intend to use all remedies available to them.

Russian state-controlled bank VTB, the parent company of VTB Capital Plc, has been under EU sanctions since 2014, but these measures exclude EU and UK-based subsidiaries that effectively serve as major financial pipelines for the Russian economy. VTB has been embroiled in the numerous corruption scandals in Russia. 

Notes to the editors:

The law firm representing the plaintiffs is Fried, Frank, Harris, Shriver & Jacobson (London) LLP.

 

About Vivacom:

VIVACOM (Bulgarian: Виваком) is the brand name of the Bulgarian Telecommunications Company EAD (BTC), the largest telecommunications company in Bulgaria and a former state-owned monopoly. It was founded as a joint stock company in 1992 as part of the split of Bulgaria's post and telecommunication services into separate companies. Currently, VIVACOM is leading the market in providing various telecommunication services, including fixed-line, mobile, Internet, radio and TV broadcasting, and data transmission services. The company is headquartered in Sofia, Bulgaria, employs around 3,500 people, and owns a mature distribution network with over 230 retail outlets. VIVACOM’s customer base includes both business and residential subscribers. It serves 2.6 million fixed phones and provides broadband Internet access to 400,000 households and free Internet access at more than 3,000 public locations in Bulgaria.  VIVACOM’s 3G network coverage expands to 99.41% of the population and 99.95% of the territory of Bulgaria.