Luxembourg-registered investor group LIC33 has revealed it will pay a token €1 for a 43.3% stake in the Bulgarian Telecommunications Company (Vivacom). It will take on €900m (US$661.4m) in debt.
In a media presentation in Sofia today, LIC33, chaired…
Luxembourg-registered investor group LIC33 has revealed it will pay a token €1 for a 43.3% stake in the Bulgarian Telecommunications Company (Vivacom). It will take on €900m (US$661.4m) in debt.
In a media presentation in Sofia today, LIC33, chaired by Franco-Belgian entrepreneur and investor Pierre Louvrier, said it will acquire the shares in the incumbent indirectly held by Bulgarian tycoon Tsvetan Vassilev. The deal is subject to regulatory approvals.
The majority owner of Bulgaria’s failed Corporate Commercial Bank (CCB), Vassilev was charged with embezzlement after the bank was shut down and is now awaiting the outcome of extradition hearings in Serbia.
LIC33, a special purpose vehicle formed specifically for this acquisition, has also acquired Vassilev’s stakes in several other companies, including TV and radio broadcaster Nurts, which Vivacom is in the process of acquiring, TV company First Digital and media research firm Garb. The newly acquired businesses, including Vivacom, have a combined EBITDA of about €180m to €200m, while their net debt totals €900m, according to the investment group.
LIC33 said it will move to acquire the remaining shares in Vivacom by the end of the year. Russia’s VTB Capital owns a third of the telco, while the remaining shares are held by minority investors. VTB declined to comment.
Vivacom issued a statement later in the day saying that it is “not aware of any transaction or pending transaction involving a majority stake in the company that would lead to change of control as per the indenture”.
However, the operator said its shareholders “are welcoming an expression of interest by any serious, well-funded and respected potential investor”. It stressed that any change of control would require approvals from shareholders, Bulgarian and EU regulators.
Financial and legal restructuring
LIC33 outlined its restructuring plans for the telco, saying the legal structure needs to be made more efficient and various CCB debts within it unwound.
“This goes hand in hand with repaying the debts owed to CCB,” it said.
The group said is already in talks to refinance an equity bridge loan due in May, adding that it intends “to honour proven, existing CCB debts by restructuring, servicing and refinancing them”.
It will seek financing from banks based in countries including France and Switzerland, it said.
LIC33 noted that it will also look to optimise the capital structures of the various companies.
Clearly establishing itself as acquisitive, the group said it will consider accretive M&A and business development opportunities in Bulgaria and further afield.
It said it believes the companies’ new ownership structure will “unlock” the capital markets and enable investment, adding that it will reinvest profits to drive long-term growth. The group noted that it intends to work with existing management teams, where possible, and will seek to retain all 4,500 current employees.
LIC33 noted that its financial backers are Louvrier and its managing partners and that there are no outside investors or partners.
Emerging markets focus
LIC33, which will focus on turnarounds, restructurings and other “special situations” in emerging markets, said its interest in the Balkan countries stems from its belief that they combine the opportunities presented by emerging markets with the solid legal and regulatory framework of the European Union.
The group believes its principals’ past experience in Russia will prove an advantage in Bulgaria as the two countries share some of the same business problems.
Vivacom posted revenues of BGN600.7m (US$327.6m) for the nine months ended 30 September 2014, down 0.8% year-on-year. The company is the largest integrated telco in Bulgaria and the third largest mobile operator after Telekom Austria’s Mtel and Telenor’s local unit.
In its statement today, Vivacom pointed out that it is liquid, cash-generative and able to pay all obligations on time. It is also prepared to fund an LTE rollout once the necessary spectrum is assigned, it added. The company is set to publish its audited financial statements for 2014 on 30 March.
