CFI must pay $1.56 bln to Altimo to retain 13.8% Turkcell stake - UK court
MOSCOW. July 9 (Interfax) - Turkish tycoon Mehmet Karamehmet's Cukurova Finance International (CFI) must pay $1.564 billion to Alfa Telecom Turkey, a company controlled by Altimo, the telecommunications arm of Mikhail Fridman's Alfa Group, in order to regain control of a 13.8% stake in Turkcell, Turkey's biggest mobile operator, the UK's Judicial Committee of the Privy Council said.
CFI, which has 60 days to pay, is also liable for interest accruing on that amount from the date of the judgment: $372,480 per day calculated at 8.861% annual interest or a total of $22.35 million if Cukurova waits until the 60th day to pay.
That would put the total amount of Cukurova's payment at about $1.586 billion. The figure includes $1.42 billion in principle on the 2005 loan from Altimo including interest for the period from November 2006 through April 2007, $25.85 million in interest stemming from the default, $359.13 million in interest on the loan and default charges in the May 2010-March 2013 period and another $48.4 million in interest from March 2, 2013 until Tuesday, July 9, the day the court confirmed its ruling, as well as $3 million in costs.
The court ruled that a portion of the $359.13 million item had been repaid on March 1, 2013 in the form of the $328.96 million in dividends Cukurova Telecom Holding paid to shareholders (Altimo owns 49%).
It is not yet known how Cukurova will repay the remainder. The Turkish company has been in talks with banks on a loan of up to $2 billion. However, back in April another major Turkcell shareholder, TeliaSonera, won a court injunction against Cukurova raising a loan to regain the shares currently pledged to Alfa. TeliaSonera took the court action in order to secure repayment of the $932 million it is owed by Cukurova.
If Cukurova is unable to organize the $1.56 billion payment within 60 days, it will have to part with the 13.8% Turkcell stake, in accordance with a Privy Council ruling in January 2013 that Altimo is the rightful owner of the stake, as noted in a press release Altimo issued on Tuesday.
"Cukurova received 60 days to repay the loan. The court has determined that if repayment is not made by the deadline, the shares will remain Altimo's and Cukurova loses all claim to them," according to the Altimo press release.
If Cukurova did forfeit the 13.8% stake, Alfa Group's share in Turkcell would rise to 27.02%.
Altimo praised the court's decision. "This ruling sets a deadline for finally settling the positions of the shareholders in Turkcell and fully restoring corporate governance at Turkcell," Altimo Vice President Yevgeny Dumalkin is quoted in the press release as saying.
Cukurova and Altimo have been litigating ownership of the Turkcell stake since 2007. Cukurova received $1.7 billion from Alfa in 2005 secured with 13.8% of Turkcell shares. The loan was part of the deal in which Alfa acquired a 49% stake in Cukurova Telecom Holding. Cukurova retained the other 51%. As a result, Altimo acquired control over 13.22% of Turkcell shares.
In November 2006, Cukurova paid Alfa Group $357 million in partial repayment of the loan. It also raised a loan of $1.5 billion from JP Morgan to fully repay the loan. However, Alfa Group said the new borrowing was a violation of the loan agreement between the two companies and demanded receipt of the loan collateral, the 13.8% Turkcell stake.
The case eventually would up in the Privy Council's Judicial Committee. It issued the ruling on Altimo's ownership of the stake in January, but withheld until July 9 a final ruling on the form of repayment - either shares or cash - and the rate of interest accrual.
The prolonged litigation has put the Turkcell shareholders in jeopardy of losing operational control of the company. In recent years Cukurova Telecom Holdings, Turkcell's majority shareholder, in which Cukurova and Altimo share ownership 51%-49%, has boycotted the annual general meetings of shareholders, preventing any decisions from being made. Along with the absence of dividend payments, it has prevented shareholders from independently electing the board of directors. The situation ultimately compelled Turkey's Capital Markets Board to insert three of its candidates on the Turkcell board as independent directors. The Turkish parliament is currently considering a bill that would give the Capital Markets Board power to appoint the entire Turkcell board of directors if shareholders fail to settle their differences.
TeliaSonera has called for a change in the structure of Turkcell, where important company decisions are being blocked by two non-controlling shareholders.
Turkcell Holding A.S. currently owns a 51% stake in the operator. In turn, 52.91% of Turkcell Holding is owned by Cukurova Telecom Holdings Ltd (Cukurova has 51% and Altimo - 49%) and Scandanavian TeliaSonera has 47.09%.
Including the shares it owns outright, TeliaSonera controls 37% of Turkcell shares, Cukurova has 26.98% and Altimo - 13.2%.
Turkcell is the biggest mobile operator in Turkey with a 54% market share. It also holds stakes in mobile operators in Azerbaijan, Georgia, Kazakhstan, Moldova, Northern Cyprus, Ukraine and Belarus.