Банкеръ Weekly



The finalization of the sale deal on Bulgartabac Holding is about to go out of the sphere of influence of the executive power and will more and more depend on the will of the magistrates. On Monday (September 9) at least two of Bulgartabac's candidate-buyers will litigate the deal at the Supreme Administrative Court (SAC). They are waiting for the last day of the 14-day term for appealing against the decision of the Privatisation Agency (PA), by which on August 23 Tobacco Capital Partners was nominated preferred buyer of the holding. PA's decision will be most probably litigated by the consortium Metatabak (dominated by the notorious businessman Michael Chernoy) and Tobacco Holding (in which International Tobacco Fund, formerly owned by Mr. Chernoy, is the major shareholder).In PA's practice so far, litigation of deals at this stage has almost always resulted in postponing their finalization. The Act on Administrative Procedures also stipulates that a deal cannot be finalized if it is litigated in court. One way or the other, the issue is now to be decided by SAC's team, chaired by Vladislav Slavov, who can rule that the State's interests require the deal on Bulgartabac to be effected without waiting for the final decision on its legality. However, most lawyers share the opinion that this would set a precedent if it happens at this specific stage of the procedure for the holding's sale. But this seems to be also the stance of Michael Chernoy's team, which after a short pause began to warm up the public for the forthcoming battle in court. Copies of documents, accompanying the offer of Tobacco Capital Partners, as well as of PA's letters (showing the agency's reservations towards that offer) were circulated. In fact, the chief problem as the BANKER weekly has already written several times, is the lack of any proof of the financial guarantees for Tobacco Capital Partners' bid (a single letter from Deutsche Bank, London has been presented, but it does not quite satisfy the seller). It should not be ruled out that on these grounds alone the magistrates could suspend the sale until things are clarified.Meanwhile, the terms set by the PA, are expiring. On September 12 the partners should present documents, verifying the origin of their money. The contract with them, after they have paid 50% of the promised price, is to be closed by October 7. The 45-day term, set by the PA to complete the negotiations, expires on that date. However, these terms will be prolonged if the SAC extends a ruling, suspending the sale procedure.But the greatest danger in front of the deal is the limited term for the bids' validity. After 120 days elapse, the nominated buyer will no longer be bound to the parameters in the proposal, filed by him on July 22.NO DEMANDS FOR RAISNING THE PRICE No increase of Bulgartabc's selling price has been commented so far, Marius Velichkov from Tobacco Capital Partners said, regarding the rumours that the consortium could pay more than the promised EUR110MN. He also noted that he did not know anything about a variant, stipulating that the bidder who rated first should undertake commitments for higher investments. The arguable issue regarding the repayment of Bulgartbac's liabilities to the budget, totalling EUR38.5MN, has not been settled either. The PA has set a requirement that the liabilities of the companies within the holding's structure should not be transformed into a debt of the buyer. For that reason Tobacco Capital Partners offered that Bulgartabac's equity capital would be increased at the expense of the money, given for the settlement of these debts. The problem is that it won't be possible to hold the general meetings of Bulgartabac's subsidiaries for raisning their capital within the set term. In other words, prior the general meetings and the increase of Bulgartabac subsidiaries' equity, the companies will be temporarily indebted to the buyer, who has sponsored them to cover their liabilities. The casus has been moved to the Finance Ministry and its stance is being waited for now.It makes no difference to us how this will be effected, the lawyer Velichkov pointed out. According to him, it is not possible to give a simple answer to the question if the proposed capital increase at the expense of paid off liabilities could be regarded as an investment.

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