“The state has been cheated of another 152 million leva,” said Bulgarian-language daily Standart on May 5, in a story on the sale of Bulgarian Telecommunication Company (BTC) to US insurance firm AIG.

According to the newspaper, this was the outcome of the way that a “claw-back” clause of the privatisation contract was dealt with. The clause foresees that the state would receive 10 per cent of an amount of more than 300 million euro, if BTC was sold within six years after the deal was concluded in June 2004 (The Privatisation Agency sold 51 per cent of BTC to Viva Ventures for 230 million euro, plus 50 million euro for capital increase.). This information was revealed to Standart by BTC former managing board head Grozdan Karadjov.

AIG will buy BTC for 2.112 billion leva and the insurance firm is acquiring the Novator fund option to take over Viva Ventures, which acquired BTC through privatisation three years ago.

Standart’s calculation shows that if the claw-back clause is kept to, the state should receive 152 million leva. But, according to Standart, the deal has been done in such a way that legally the clause is evaded. Thor Bjorgolfsson’s Novator is buying not BTC but Viva Ventures, meaning that there is no BTC shares transfer.

Subsequently, Novator is to sell Viva Ventures to AIG and still there is no BTC shares transfer. In this way the amount in question is not due, lawyers were quoted as telling Standart.

Novator said it will pay to the state everything it owns, including the duties of the first investor in the BTC deal.

The BTC acquisition takes effect on June 11 2007. This is the date of expiry of the three-year period during which the company is under the supervision of the Post-Privatisation Control Agency (PPCA). Before this date, share transfers are possible only with PPCA permission, which, according to Standart, is another good reason for the current owner to get around the rules.

But another Bulgarian daily newspaper – Dnevnik – reported on May 7 that no one could provide precise information how much current BTC owner Viva Ventures will pay to the state after the telecom company re-sale. Dnevnik said that there is a maximum threshold on payments to the state because of a a re-sale, of 80 million leva. Bjorgolfsson concluded a deal for the sale of 65 per cent of BTC to AIG for 1.08 billion euro through his option, which he holds for the Viva Ventures purchase. In this contract there is also an agreement on the sale of a further 25 per cent.

Dnevnik said that this meant that the state should receive about 70 million euro. According to lawyers, the amount which has to be paid to the state is no more than this threshold. However, sources quoted by Dnevnik said that according to Novator’s lawyers, the owner should pay the state about 20 million euro because he had made many investments in BTC, which should be deducted. The agreement does not specify clearly how the amount owned to the state because of a further sale should be calculated.

In an interview with the Financial Times (FT), Bjorgolfsson said that he expected that a net profit from the sale of about 600 million euro, as reported by Dnevnik. He had paid 650 million euro for his Viva Ventures option. The profit expected is supposed to arise after realisation of the additional 25 per cent owed by Bjorgolfsson, the FT said. It said that 20 per cent of the additional shares were owned by Novator and Island investors have the remaining five per cent. A subsidiary of the Island bank Landsbanki, also connected to Bjorgolfsson, currently held slightly more than 13 per cent of BTC.

Bjorgolfsson told the FT that AIG gave the highest offer for 65 per cent of BTC even though in the last moment Oger Telecom increased its offer