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.