Svyaznoy goes into bankruptcy
The Svyaznoy company is going to initiate bankruptcy proceedings. The corresponding notice of intent on behalf of Network Svyaznoy LLC was published on the Federal Resource on February 14, 2023. In accordance with the law, the debtor is obliged to publish such a notice at least 15 calendar days before the filing date of the bankruptcy petition itself.
“In connection with the appearance of signs of bankruptcy at Set Svyaznoy LLC, provided for by the articles of the federal law “On Insolvency (Bankruptcy)”, the applicant intends to apply to the arbitration court with an application for declaring Set Svyaznoy LLC bankrupt,” the message says. .
How many points does Svyaznoy have
Svyaznoy’s federal retail chain has over 2,600 stores in 1,100 Russian cities, according to the company’s website. The company also includes the Apple Premium Reseller network under the Cstore brand, which has 33 stores in 22 cities.
From 2017 to 2020, Set Svyaznoy LLC increased revenue and generated losses (almost RUB 5 billion loss in 2019 with revenue of RUB 95.3 billion, about RUB 2 billion loss in 2020 with revenue of 102 billion rubles), but in 2021 it turned into profit – 15.2 million rubles. with a record turnover for the network of 105 billion rubles.
Svyaznoy has accumulated very large debts: with a turnover in 2021 of 105 billion rubles. accounts payable (debts to suppliers) amounted to almost half of this amount (54 billion rubles), calculated a Vedomosti source close to one of the Russian distributors. For comparison: with a similar turnover (93.7 billion rubles), DNS accounts payable for the same period amounted to only 6.6 billion rubles.
This financial position of the company was the reason that in 2022 Svyaznoy faced dozens of large lawsuits from creditors and counterparties. Alfa-Bank filed several lawsuits at once against Svyaznoy and its shareholder, Cypriot DTSRetail, for 6 billion rubles. At the end of November 2022, the parties agreed to conclude a settlement agreement, and the representative of Alfa-Bank spoke not about a one-time repayment, but about the installment plan of obligations. In early December, VimpelCom sued the Svyaznoy network for 838 million rubles. as a refund of a previously paid advance. In January 2023, the court recovered 5 billion rubles from Svyaznoy. in favor of the Merlion distributor.
At the beginning of October 2022, Sovcombank tried to initiate the bankruptcy of Svyaznoy after a lawsuit was filed in the amount of 2.5 billion rubles, Vedomosti reported. Svyaznoy’s litigation with Sovcombank ended with an amicable agreement, as a result of which the parties drew up a debt repayment schedule for the entire amount by the end of 2025. “, but later canceled it.
In early December last year, from an interview with RBC with Megafon CEO Khachatur Pombukhchan, it became known about the sale of the operator’s stake in Svyaznoy. He did not disclose the buyer of the share, as well as the amount of the transaction, and among the reasons for exiting the retailer’s capital, the top manager indicated that Svyaznoy has nothing to do with the telecommunications market, but focusing on this company “takes time, the efforts of the team and is useless “.
MegaFon owned a stake in Svyaznoy through DTSRetail. From the financial statements of MegaFon under IFRS for 2021, it follows that the operator’s share in the capital of DTSRetail was 26.5%. The share of DTSRetail itself in Set Svyaznoy LLC was 69.25%, follows from SPARK. The buyer of MegaFon’s share in Svyaznoy could be the structures of the current co-owner of the network, businessman Oleg Malis, Vedomosti sources reported later. At the same time, one of the interlocutors said that the Svyaznoy management was preparing to update the retailer’s concept.
Now Svyaznoy’s intention to declare its own bankruptcy indicates that at the moment it cannot satisfy the requirements of all creditors, explains Forward Legal’s lawyer Danil Bukharin. From the open judicial database of arbitration cases, it follows that the total debt burden of Svyaznoy can reach 17.2 billion rubles, while only in 2022 claims were filed against Svyaznoy in the amount of 15.8 billion rubles, he calculated.
If Svyaznoy’s bankruptcy application is recognized as justified, the court will introduce a monitoring procedure in relation to it and appoint an interim manager, Bukharin continues. The main difference between the debtor’s own bankruptcy statement and the creditors’ statement (Aviapark and Sovcombank) is the ability to choose an interim manager, he says. “The creditor can indicate a specific candidate, while at the request of the debtor, the court determines the candidate randomly,” the lawyer explains.
“From the moment the bankruptcy petition is recognized as justified, all obligations of Svyaznoy will be considered to have occurred, and all creditors must declare their claims in the bankruptcy case. The interim manager, in turn, will be obliged to find out the reasons for the bankruptcy and assess the possibility of the debtor’s financial recovery,” Bukharin notes. At the same time, during the observation, the company will be able to continue its activities, the lawyer adds.
Most likely, the bankruptcy procedure will not give anything good to either Svyaznoy or its creditors, Yuri Fedyukin, managing partner of Enterprise Legal Solutions, believes. Given the established practice, debt restructuring and release from excess debt burden in order to restore the debtor’s solvency are unlikely, he said. Such cases are rare – in the vast majority of cases, a bankrupt goes into bankruptcy proceedings, and upon its completion is liquidated, says Fedyukin. As a rule, secured creditors of the third priority are content with little (on average, following the sale of the debtor’s property, they get no more than 7% of the stated requirements), he points out.
Satisfaction of the requirements of Svyaznoy’s creditors in the current situation is actually possible in two ways, Bukharin notes. In the first case, creditors may decide that Svyaznoy will be able to pay off its debts by continuing its activities (in this case, creditors, for example, may conclude an amicable agreement with the debtor, which will agree on an installment plan and / or deferral of obligations). In the second case, creditors may sell the assets of Svyaznoy during bankruptcy proceedings, which, as a result, will lead to the liquidation of the company. In practice, it is the second scenario of the development of a bankruptcy case that is most often encountered, the lawyer says.
Even if Svyaznoy applies with a statement, it can take quite a long time before the stores close, says lawyer Pavel Zhelnovod, partner at Nova Inc law firm. As a rule, the court introduces a monitoring procedure in which the debtor’s management will remain independent, but with a restriction on certain transactions, he notes.
The results of the bankruptcy procedure will depend on many factors, which are difficult to predict at this stage, agrees Rimma Malinskaya, partner at MEF Legal. “Initiating a procedure does not always mean closing the business,” she explains. – Strictly speaking, filing an application does not always mean the beginning of bankruptcy proceedings, since the law provides for the need to substantiate its introduction in court. In addition, the bankruptcy law also provides for the possibility of introducing a procedure aimed at restoring solvency, although, of course, in practice this method is used much less frequently than standard procedures for settling accounts with creditors and terminating a legal entity.”