August 22 (SeeNews) - Russian businessman Dmitriy Kosarev, who claims in a lawsuit that he owns 43.3% of Bulgarian Telecommunications Company (BTC), warned on Monday that the potential completion of the sale of BTC's sole owner, InterV Investment, could eventually result in the insolvency of Bulgaria's biggest telecom by revenue.
In yet another attempt to stop the deal, Kosarev, who claims that Russia's VTB Capital is stealing his stake in BTC by selling InterV to Bulgarian businessman Spas Roussev over a debt repayment failure, said that the recent consent solicitation process in respect to BTC's 400 million euro ($452.3 million) 6.625% bond issue did not result in obtaining an effective consent of the bondholders.
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In June, BTC, which operates under the brand name Vivacom, said 87.43% of bondholders accepted the proposed change-of-control waiver, which will become effective upon the execution of the company's acquisition before September 30.
"The consent as granted is expressly conditional, subject to, among other things, lack of proceedings (pending or threatened) and successful completion of KYC [know-your-customer] and anti-money laundering checks," Kosarev's British Virgin Islands-registered special-purpose investment vehicle Empreno Ventures said in a press release.
It elaborated that these conditions cannot be satisfied, as Empreno has launched several ongoing legal proceedings challenging the transaction in various ways in Bulgaria, Luxembourg and London.
In the absence of an unconditional consent, the finalisation of the BTC transaction could lead to the need for an early redemption of all of the bonds at 101% of the principal amount, together with accrued and unpaid interest, Empreno Ventures noted.
"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 said and requested that Vivacom management address the respective risks in the company’s financial statements.
Kosarev has previously urged BTC bondholders to turn down the change-of-control waiver, claiming that if the waiver request is granted, the issuer will face increased debt level, difficulties to resist granting a further consent to increasing the issuer debt level, as well as increased legal risks.
In its first-half financial report, BTC booked 784.4 million levs ($453.1 million/401.1 million euro) in total borrowings, including a secured bond issue worth 778.9 million levs. It had total assets of 1.3 billion levs at end June and an operating cash flow of 122.2 million levs.
BTC's bond, issued in 2013, was initially rated B1 by Moody's and BB- by Standard & Poor's. Subsequently, S&P lowered its ratings to B in April 2015, and to B- in July 2015, to reflect the uncertainties surrounding the InterV deal. In October 2015, it revised its CreditWatch implications on the ratings to negative from developing, reflecting higher uncertainty and potential short-term event risk.
In November 2015, VTB Capital, the investment banking unit of sanctions-hit Russian financial group VTB, completed an auction for Luxembourg-domiciled InterV, achieving a price of 330 million euro. The sale procedure was launched in late August, after InterV failed to repay a 150 million euro bridge loan secured via a share pledge over 100% of the shares of InterV, which matured in May. The deal was approved by the Bulgarian competition regulator in January.
(1 euro=1.95583 levs)