Банкеръ Weekly



In the night of July 18 to 19 (Saturday) the Bulgarian Privatisation Agency (PA) and Koc Holding signed second set of agreements and accompanying documents for the sale of 65% of BTC. (On March 21, 2003, was signed the contract with Viva Ventures which is currently being litigated in court). In the meantime Koc Holding's lawyers were still feverishly working on the preparation of the huge pile of documents (of which seven were the main ones). And the newly assigned Minister of Transport and Communications Nikolay Vassilev was patiently waiting in his office to have the new BTC's statute, the shareholders' agreement and the management agreement presented for signature. He managed to sign the documents at 4 a.m. on July 19. But his patience can be easily explained - former minister Plamen Petrov had failed to sign part of the annexes to the agreement with Viva Ventures which was one of the reasons why the documents were turned down by PA's Supervisory Board. From Turkish side the documents were signed by an authorized representative of the consortium as the President of Koc Information Technology Group Ali Koc did not wait for the finale and still in the evening flew to Istanbul with his private jet.Both the right and the left wing opposition parties were filled with much doubt about the late-at-night siging of the privatisation documents. The politicians immediately accused PA of complete lack of transparency and of attempt to exert influence on court. The tension was additionally intensified by one coincidence. Negotiations with the Turks were started on May 8 and were supposed to be concluded in 50 days. Yet PA extended the term because of the legal cases. (Which is exactly what happened in the winter when PA was negotiating with Viva Ventures. Then Koc Holding renewed their legal attack for ungrounded prolongation of negotiations). In this way the new deadline for bargaining with Koc to be ended was July 18. On the very same day a five-member session of the Supreme Administrative Court (SAC) heard the claim filed by PA's Supervisory Board against the ruling of the three-member session of the same court. On June 20 the three-member court ruled in favour of Viva Ventures. The magistrates cancelled the decision of PA's Supervisory Board to cancel in its turn the agreement for privatisation of 65% of BTC's capital. Yet then court left as valid the second point of the decision of PA's supervisors to ccontinue negotiations with the Turkish consoritum and even to bring them to an end.In its official release from July 19 the former favourite Viva Ventures reminded that there was a SAC's ruling according to which the Supervisory Board's decision had still not been enforced and negotiations with two candidates could not be held at one and the same time. According to Georgi Pirinski, a BSP MP, the Friday 9:38 p.m. signing of the contract is much debatable until the procedure with Viva Ventures is not finalised. He is certain that all is about corporate interests which cause social damages as the price agreed for BTC is much too low. Deputy Prime Minister Vassilev on his turn commented that there was nothing wrong in having two completed agreements for BTC, awaiting only SAC's ruling.The final ruling is expected earlier than the usual 30 days - around July 28-30. If it's in favour of Koc, then within ten days afterwards the agreement will be presented for approval to the PA's Supervisory Board. The Board in its turn will have to make decision in 14 days'. But everyone misses the fact that actually the last word on the deal will have the ministers who are supposed to approve of the final agreement. The negotiations with Koc are carried on according to the new Chaper 7 a of the Privatisation Act and BTC was added in the special list just in case. Viva Ventures, however, was picked out for buyer before the notorious amendments to the Privatisation Act to be enforced at end-February, and so the Austrians will mind the old order and a deal with them doesn't need to pass through the government.Before the deal to be ended, however, there are still a number of conditions: a permission to be issued by the Commission for the Protection of Competition, access to classified information to be granted, the state guarantees with BTC's creditors to be reconsidered, etc. So even at the highest rate posiible the deal will hardly be ended before September - October. And the case is very posiible to be postponed for the winter, especially if another reason for claiming against is encountered.The outcome is much dependent on the incoming ruling of SAC. The situation seams clearest in case magistrates approve of the agreement with Viva and order the deal to be concluded with the Austrian consortium. If the court turns down the claim of Viva Ventures to make a ruling and leaves the case for estimation by the Supervisory Board, then there are several scenarios for the outcome of the procedure. The first one is the court to approve of the ruling of the three-member SAC (in favour of Viva) and to return the case to supervisors who either to approve of the agreement or to turn it down with new agruments. In that case a new opportunity for claiming against will be opened.It's possible, however, the court to decide that the Supervisory Board is right and to cancel the three-member session's ruling (in favour of Koc). Then the agreement with Koc will enter PA's Supervisory Board for discussions (and will be either accepted or rejected) and then will pass to the government. If this agreement is not approved then the Turkish consortium will certainly claim agains. Lawyers do not share one and the same opinion whether Viva stands a chance of claiming if the agreement with Koc is backed by both institutions.Unlike the rich amount of legal scenarios, the parametres of the deal are not likely to change much. The price will be either EUR210MN or EUR215MN depending on which candidate wins the final battle. Koc Holding offers cash price by only EUR5MN higher than the one of Viva Ventures. The advantage of the Austrian candidate are the offered higher additional investments - EUR300MN while the Turkish consortium plans to invest only EUR218MN. Koc will sack less workers, but is outpaced by Viva on the programme for requalification of the dismissed employees, etc. The greatest advantage of Koc seems to be the fact that the Turks have no claims on future amendments in legislation (while Viva Ventures objected to the Telecommunications Law to be amended). However, Koc wants to have all expenses for participation in the deal refunded in case of failure. Moreover, the Turkish consortium had agreed with Deputy PM Vassilev's offer in case of future capital increase the new shares to be acquired not at nominal, but at market price (that is presently at about BGN63 at nominal of BGN35).Thus the state-owned stake in the telecom will be preserved from diminishing. This stake will initially be fixed to 35 per cent. But after the sale of 20% of BTC at the stock exchange (which is planned to happen within three months after finalisation of the deal) and after the realisation of the restitution shares (about 3%) the state-owned stake is expected to drop to 12 per cent.

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