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.