The top management of the Russian Vimpelcom, headed by CEO Alexander Torbakhov, agreed to buy an asset from the Dutch holding Veon in exchange for paying off its debt. The scheme is not completely clear, but according to Kommersant, VimpelCom will buy $2.1 billion worth of Veon bonds from holders by issuing replacement bonds that will effectively double the Russian company's own debt burden.
Mobile operator Vimpelcom (Beeline brand) announcedthat a group of top managers of the company, headed by CEO Alexander Torbakhov, entered into an agreement to acquire 100% of it from Veon. The buyer will be OJSC Copernicus-Invest 3. According to SPARK-Interfax, it was registered on November 14, the beneficiary and general director is Mr. Torbakhov. The fact that the management of the Russian business of Veon is planned to be transferred to top management, “Kommersant” wrote on November 2.
The deal will amount to 130 billion rubles. (about $2.1 billion), they will be paid mainly due to the fact that VimpelCom will take over and repay the debt of Veon Holdings BV, held through the National Settlement Depository.
Funding sources are not disclosed. Investment bank Aspring Capital acted as financial adviser to Veon holding on the deal. They declined to comment.
VimpelCom is 100% owned by Veon, 25% of which is owned by LetterOne Holdings. The founders of LetterOne Holdings, the founders of Alfa Group Mikhail Fridman, German Khan and Alexei Kuzmichev, as well as member of the board of directors Petr Aven, have been under sanctions since the spring. In May, Alexei Kuzmichev and German Khan withdrew from the number of co-owners of LetterOne. Mikhail Fridman, German Khan and Alexey Kuzmichev are also the founders of Alfa Group.
As part of the deal, Veon will also acquire the rights to operate in Kazakhstan and “certain intra-group loans will be repaid,” Veon said in a statement. The holding controlled 75% of the Kar-Tel company operating under the Beeline brand in Kazakhstan through VimpelCom, and businessman Bulat Utemuratov owned another 25%.
The entire VimpelCom during the sale was valued at RUB 370 billion, that is, based on a factor of 3.2 of the projected 2022 EBITDA. In January-September, Vimpelcom's revenue amounted to 339 billion rubles, EBITDA - 115 billion rubles. Kommersant's interlocutor in the telecom market, who is familiar with the details of the deal, explains that the estimate is given without taking into account net debt. As of the end of 2021, PJSC VimpelCom's liabilities for borrowed funds amounted to 167 billion rubles, follows from the data of the Federal Tax Service in the database kartoteka.ru. Veon's debt at the end of the third quarter was $8.2 billion.
The agreement "allows Veon to benefit from a potential subsequent sale of VimpelCom at a higher valuation within 30 months of closing the deal and provides for typical termination rights in favor of Veon in the event of a change in control of OAO Copernicus-Invest 3," the agreement reads. message Veon. As one of the sources of Kommersant explained, we are talking about "protection against unfair purchase for the purpose of resale."
It is planned to complete the transaction by June 1, 2023, but the parties have the right to extend the period if obtaining licenses, permits or creditors' consent is delayed.
Veon will receive about 130 billion rubles, but not in the form of money, clarifies the interlocutor of Kommersant, who is familiar with the details of the negotiations. According to him, VimpelCom will buy Veon bonds from the holders: “The debt pushdown scheme will allow you not to pay money abroad. Vimpelcom buys back the bonds, becoming the one to whom Veon owes money. Since VimpelCom owes Veon 130 billion rubles, they can set off the debts.”
According to Ekaterina Makeeva, partner and head of the sanctions practice at A-PRO, Ekaterina Makeeva, we can talk about the issue of replacement bonds by VimpelCom: “Most likely, the deal is aimed at converting the debt of the parent company to the bondholders into the debt of the Russian VimpelCom. The problem is that such a scheme requires the consent of bondholders, creditors and the regulator.” It is not known how Copernicus-Invest 3 will receive Vimpelcom's papers and how they will pay for them.
A Kommersant source in the market believes that due to a change in the borrower, creditors may require collateral in the form, for example, of securities of the Russian company itself. Creditors may have questions, for example, about a significant increase in Vimpelcom's debt burden. The law does not contain the mandatory provision of additional security, even if the change of the debtor under the bonds results in a deterioration in its quality, Elena Mende, lawyer of the Baltic Bar Association named after Anatoly Sobchak, clarifies: “The final terms of the debt transfer will be agreed upon by the parties to the transaction and the representative of the bond holders. Vimpelcom's shares can be transferred as security, but partially, given the difference in valuations.