Restructuring: VTB prepares for more CEE debt-for-equity deals

By:
Dominic O’Neill
Published on:

Similar deals to follow Vivacom buyout; eyes Bulgaria’s transport privatization

Struggling companies in central and eastern Europe can hope for new investment from VTB Capital this year, particularly via debt-for-equity restructurings.

Atanas Bostanjiev, head of the Russian state-owned bank’s international arm, says he is preparing for increased capital deployment in 2013 on deals similar to its recent takeover of Bulgarian telecoms firm Vivacom.

Amid the regional economic downturn, Bostanjiev, a Bulgarian national, says many companies in the region have sound business models, but are simply facing difficulties rolling over debt, as eurozone banks retrench.

A VTB Capital-led consortium took over Vivacom in November through a €130 million equity injection partly used to pay down debt. Although the consortium might seek to sell its stake to a strategic investor, Vivacom’s debt burden was reduced from €1.7 billion to €588 million after the transaction.

"I certainly think there is more potential for these kinds of [restructuring] deals in 2013," says Bostanjiev, talking about central and eastern Europe in particular. "There will be more need for new sources of funding that can step in."

The Vivacom deal is not the first buyout by VTB in Bulgaria. In 2011 a unit of VTB bought a controlling stake in the country’s main cigarette manufacturer, Bulgartabak, for €100 million.

Bostanjiev says the bank is looking at further privatization opportunities in Bulgaria, including taking equity stakes. He says one example might be transport, where the Bulgarian government is trying to sell off parts of a loss-making state rail firm.

VTB Capital was one of the bookrunners on a $500 million sovereign bond this November in Serbia, another country with its fair share of struggling state-owned firms. "The Serbian Eurobond transaction will help bring VTB Capital more deal opportunities in Serbia," says Bostanjiev.

Bostanjiev also points to Hungary, Romania and Croatia as attractive markets for the bank. He says VTB Capital, whose parent VTB is also state-owned, is already looking at opportunities in Slovenia too, where the state-dominated banking sector is facing a controversial government bailout.

"Austrian, Italian and Greek banks have all invested heavily in central and eastern Europe and they have much less free capital and balance sheet than us," says Bostanjiev. "We have unencumbered balance sheet and capital that we are looking to deploy."