Billions for Rosneft: Forbes examined the finances of AFK Sistema

AFK Sistema will appeal against the decision of the court to recover almost 136.3 billion rubles in favor of Rosneft. But in the event of a final loss, it will have to pay. Does the company of billionaire Vladimir Yevtushenkov have such money?
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The Arbitration Court of Bashkiria on August 23 refused for the third time AFK Sistema in the challenge of Judge Irina Nurislamova, who is leading the process on the suit of Rosneft. In the trial in Bashkortostan, which began on June 6, the main stages were completed - the positions of the parties were presented, a round of questions and answers was completed, and 38 volumes of the case were examined. At a meeting on Wednesday, which became the eleventh in a row, finally a decision was made - the court partially satisfied the plaintiff's demands. The judge decided to collect in solidarity with PJSC AFK Sistema and Sistema-Invest in favor of PJSC ANC Bashneft the amount of losses of almost 136.3 billion rubles (Rosneft claimed 170.6 billion rubles). It was also decided to recover from the System and Sistema-Invest in favor of Rosneft a state duty of 159,740 rubles. The judge did not disclose the reasoning part of the decision.

The official representative of AFK Sistema Sergei Kopytov told Forbes that the decision will be accurately appealed. In his opinion, "the judge actually questioned the legality of such standard corporate procedures as preparation for an IPO, redemption and repayment of own shares." In turn, a spokesman for the oil company, Mikhail Leontiev, told Interfax that Rosneft would decide whether to appeal the court's decision regarding the amount of penalties from AFK Sistema, after studying the reasoning part. Forbes has calculated, by what means has "System" and whether it is enough of them for payment of such sum.

Sistema money

According to AFK Sistema's presentation for the first quarter of 2017, the cash position of the corporate center was 20.5 billion rubles, while the debt exceeded 94 billion rubles. The company's accounts could have more money, but in 2015-2016, Sistema actively invested in new assets. In 2015, 8.7 billion rubles went to purchase assets in agriculture, 8.8 billion rubles - to purchase the Kronstadt Group and financing RTI, 5.2 billion rubles - to buy assets in real estate.

As of December 31, 2015, Sistema retained 50.6 billion rubles, in 2016, AFC received an additional 99.7 billion rubles (dividends, funds from the sale of part of MTS and SG-Trans shares, as well as compensation for losses, Arising from the withdrawal of shares of Bashneft, from Ural-Invest). In 2016, AFK spent 22 billion rubles on investments in agriculture, hotel assets and real estate, and 11.4 billion rubles for the additional capitalization of MTS-Bank. 52.6 billion rubles was spent on the repayment of own debts and the debt of a subsidiary of SSTL (India).

The market value of AFK Sistema's most liquid assets - MTS shares is 242 billion rubles, Detsky Mir shares (52.1%) - about 36 billion rubles. That is, the cost of public assets allows Sistema to attract credit funds to pay off Rosneft's claims in case it does not succeed in appealing the court's decision. On the accounts of MTS at the end of the first quarter of 2017 there were about 25 billion rubles, which in theory the company can send for payments to shareholders, although AFK Sistema, which owns 48.9% of MTS, in this case will receive less than 11 billion rubles.

Suffering and Punishment

Rosneft's press secretary Mikhail Leontyev, in an interview with Forbes, called on AFK Sistema's management to pay compensation for the damage. According to him, this is the only way for a peaceful settlement of the dispute between the companies.

"A peaceful settlement consists in satisfying our claims, this is an arbitration process, not a criminal one. Or let them prove in court that the damage is not that, suppose. We do not work on the concepts arbitrarily existing with Sistema management from the 1990s, when they were formed as a business ... We do not have the right to "shave a bit", we protect the interests of our shareholders, our asset - Bashneft. If they are ready (to pay compensation for damage), then why do we need a court? Let them give the money and we do not need anything from them. We do not need any suffering, experience, punishment, "Leontiev said.

In June 2017, AFK Sistema offered Rosneft to settle the dispute out-of-court, however, Rosneft considered that Sistema did not submit concrete proposals. On June 26, the Federal Bailiff Service in Moscow seized Sistema and Sistema-Invest, which held 31.76% of the shares in the authorized capital of PJSC MTS, 100% in the authorized capital of Medsi Group of Companies and 90.47% of shares in the authorized capital of JSC "BESK".

Sistema tried to appeal against this decision and to obtain a lifting of the arrest, but the court listened to Rosneft's arguments on this issue.

"The arguments of AFK Sistema that" the actual value of Sistema's assets (1,104 billion rubles) is more than 6.5 times higher than the amount claimed to it, which is more than enough to enforce a court decision, "are based on IFRS statements , Which contains information about the assets of the entire AFK group, including subsidiaries and affiliates that are not defendants in the suit. To assess the solvency of respondents, only accounting data on RAS should be taken into account, "a representative of Rosneft stated in court on July 6.

He also noted that the real value of Sistema's assets on the territory of Russia, free from encumbrances and liabilities of third parties, is no more than 43.9 billion rubles, "which confirms the difficulty of executing a judicial act in connection with the insufficiency of the debtor's property in the territory of the Russian Federation ". "More than 150 billion rubles - the cost of financial investments in foreign assets, more than 120 billion rubles - long-term obligations. In addition, Sistema has short-term liabilities, deferred tax assets, part of the shares of RTI OJSC is in pledge, and so on, "the representative of Rosneft stressed.