VTB Capital Faces Fraud Accusations in the UK Over Handling of a Loan
By Editors February 11, 22:01
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The UK authorities have received a complaint against VTB Capital, the UK-based investment banking arm of VTB, Russia’s second-largest bank, for allegedly rigging an auction to sell an equity stake in Vivacom, Bulgaria’s largest mobile and fixed telephony provider and ISP, to its affiliated party.

The Serious Fraud Office of the UK has received a criminal complaint from InterV and Dmitry Kosarev, the principal owners of the largest Bulgarian telecommunications company Vivacom, alleging that VTB Capital, the UK arm of the state-owned Russian bank, illegally seized and sold a large equity stake in the company to a connected party, Spas Rusev, for an unfairly low price. 

VTB Capital dishonestly seized InterV’s shareholding in Vivacom by conspiring with a third party to block the owners’ access to the company, the SFO complaint says, naming senior officers of VTB Capital Plc and JSC VTB as responsible for the alleged fraud. In a separate legal action, Mr. Kosarev is suing VTB Capital in London for damages in excess of EUR 143m for allegedly selling Vivacom for a price that significantly under-represented the true value of the company. Both the complaint and copies of the lawsuits have been reviewed by RUSSIA! magazine.

Individuals named in the SFO complaint include Mr Nick Hutt (CEO of VTB Capital plc), Mr Alexei Yakovitsky (Global CEO of VTB Capital and CEO of VTB Capital Holding (Russia)) and Mr Yuri Soloviev (Deputy Chairman of the Management Board of JSC VTB Bank and Chairman of the Board of Directors of VTB Capital Holding (Russia))

Dmitry Kosarev filed a complaint against VTB Capital Kosarev's Media Rep

Vivacom is the brand name of the Bulgarian Telecommunications Company EAD (BTC), the largest telecommunications company in Bulgaria and a former state-owned monopoly. It was founded as a joint stock company in 1992 as part of the split of Bulgaria’s post and telecommunication services into separate companies. Currently, Vivacom is leading the market in providing various telecommunication services, including fixed-line, mobile, Internet, radio and TV broadcasting, and data transmission services. The company is headquartered in Sofia, Bulgaria, employs around 3,500 people, and owns a mature distribution network with over 230 retail outlets. 

Kosarev acquired Viacom from Tsvetan Vasilev,  a Bulgarian financier currently ranked second influential person in the country by Forbes magazine. Vasilev purchased stake in Vivacom back in 2012 after the company incurred significant debt after a buyout by AIG in 2007. 

According to the SFO filing, problems between Kosarev and the bank started back in November 2013, when VTBC extended an up to EUR 150 million bridging loan to InterV, to be repaid by 22 May 2015, and secured by InterV’s stake in Vivacom. InterV was required to refinance the loan before 22 November 2014 or pay a duration fee of 1.35% of the loan balance. By July 2014, InterV was actively looking for opportunities to refinance the loan, and actually found potential new lenders but VTBC frustrated these efforts, essentially forcing InterV to look to it as the sole source of refinancing, on terms that were “wholly unreasonable and tantamount to extortion (including the requirement for a EUR 25 million “special distribution” payable to a VTB subsidiary, Crusher Investment Limited). Unsurprisingly, InterV rejected VTBC’s offer, paying the duration fee of approximately EUR 2 million. In April 2015, VTBC issued another offer to refinance the bridge loan on similar terms, which was once again rejected by InterV as “unreasonable.”

In June 2015, the lenders agreed not to exercise certain rights until 10 July 2015 (the agreement was later extended until 10 February 2016), including the right to demand an accelerated repayment of the loan and the right to enforce the transaction security. Milen Veltchev, CEO of VTB Capital AD (the bank’s Bulgarian subsidiary) told InterV shareholders LICT’s and Empreno’s lawyers on 30 September 2015 that he was “not aware of any enforcement actions.” However, VTBC took the next step in October 2015, announcing that it had hired a consultancy to advise on the security sale, which was to be finalized by the middle of November 2015. LICT and Empreno informed VTBC that they were “able and willing” to refinance the bridge loan. VTBC claimed that it was prepared to consider any “serious and credible bid,” however, when asked for due diligence documents, it stalled the processes and announced that the auction to sell off InterV’s assets would go ahead on 19 November 2015. InterV shareholders contacted VTBC with a request to participate in the auction, but VTBC stalled again, effectively excluding InterV’s shareholders from the auction.

Spas Rusev was ultimately successful in the auction, acquiring the assets for EUR 330 million, which apparently was financed by VTB. That bid was substantially below the market value of the assets, and, as InterV shareholders discovered later, was EUR 143 million below a competing bid that came from CVC Capital Partners Limited. Based on the facts of the case, InterV shareholders LICT and Empreno are asking the Serious Fraud Office for redress in this particular case and to investigate the business practices and conduct of VTBC. However, the investigation has been obstructed by VTBC since. A lawsuit related to this case has been filed in the UK, and Russian authorities are also considering starting a criminal investigation into the actions of undisclosed individuals in this connection, Vivacom said in a press release. 

As of publication time, VTB couldn’t be reached for comment for this article, but the Bank dismissed InterV’s claims as not valid in a comment to Evening Standard newspaper. 

Editors February 11, 22:01
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