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Articles & publications
12.05.2010
Svyazinvest shareholders to examine swap transaction of MGTS stake for 50% interest in Sky Link in JuneInterfax
The shareholders of state-controlled telecommunications holding Svyazinvest are expected to review in June a transaction aimed at swapping a 23.3% stake in Moscow City Telephone Network (RTS: MGTS) (MGTS) owned by the holding, for a 50% stake in Sky Link owned by AFK Sistema (RTS: AFKS), the general director of Svyazinvest Evgeny Yurchenko told Interfax.
“The transaction will be reviewed by the Board of Directors in May and by shareholders in June”, Mr. Yurchenko said, noting that no specific dates are yet available.
According to earlier reports, in May the Russian Prime Minister Vladimir Putin signed a resolution on divesting Svyazinvest’s stake in MGTS as part of a transaction with AFK Sistema.
According to the document, MGTS is to be exchanged for a 50% stake in Sky Link which is owned by Sistema Inventure (a wholly owned subsidiary of AFK) with additional payment not less than the market value determined on the basis of the report by the independent appraiser”.
The deal could be executed provided that MS-Direct (a subsidiary of Sky Link) manages to accumulate the other 50% of Sky Link’s equity, according to the resolution.
In April Sistema raised its beneficiary stake in Sky Link to 100% as a result of the acquisition by MS-Direct of a 50% stake in the operator from RTDC holding.
Ernst & Young appraised the value of a 23% stake in MGTS at RUR 9.7 bln, and 100% of Sky Link at RUR 9.4 bln. As a result, AFK Sistema could make additional payment equal to RUR 300 mln.
Aside from the government resolution, a decision by Svyazinvest shareholders on the sale of MGTS is also required.
Swapping Sky Link for MGTS is part of a deal to exchange telecommunications assets between the state and AFK Sistema as a result of which the Russian would regain its status as the sole owner of Svyazinvest, while Vladimir Evtushenkov’s holding would have its debt to Sberbank (RTS: SBER) and a large minority shareholder in MGTS written off.
The initial structure of the transaction called for Comstar-UTS (a subsidiary of Sistema) to assign its blocking stake in Svyazinvest (25% + 1 share) to Vnesheconombank (VEB). In turn, VEB was to take over Comstar’s RUR 26 bln debt to Sberbank that was used to secure a blocking stake in Svyazinvest. The holding, in turn, would hand over to Sistema its 23.3% stake (28% of voting shares) in MGTS in exchange for a 100% interest in Sky Link.
Ernst & Young appraised a blocking stake in Svyazinvest at RUR 26 bln. In February Svyazinvest announced a new structure for the asset swap, according to which instead of VEB, Rostelecom (RTS: RTKM) would act as the purchaser of the blocking stake in Svyazinvest. Rostelecom could buy back Svyazinvest’s stake from Comstar after refinancing the transaction by issuing bonds, while Comstar-UTS would use the proceeds derived from Rostelecom to pay off is debt to Sberbank.
At the end of April, Rostelecom announced that it would be holding public tenders for credit lines worth a total of RUR 30 bln, which would then be used for refinancing by way of a bond issue.
All agreements related to the asset swap are expected to be signed by the end of the first half of 2010, since this by this date when statutory deadline for the appraisal of assets is set to expire.
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