An empire on credit

He is like a sapper. One wrong move and an avalanche of credits will sweep him away together with his entire business empire. This has been the drama of Ivo Prokopiev for several years now. For a long time, he has been primarily known as a creator and publisher of the Capital financial newspaper and Dnevnik daily. Today his media business is just the top of the iceberg. Prokopiev’s firms exceed 140 in number, if we do not count the minority shares in offshore companies. Their fields of activity are various - from finance operations to publications on Internet sites.

How can such a vast business be financed? Unless you are the son of Rockefeller, this is done by loans. It is normal for a businessman to borrow money from a bank and to return it within specific deadlines. But who esle in the country can boast with credits amounting to BGN 600 mln? The fact that Prokopiev’s loans from at least 10 banks stand at this colossal sum is not a legend but the very truth. Prokopiev owes some BGN 568.712 mln, according to a credit register of the Bulgarian National Bank. By numerous tricks and financial maneuvers, he managed to reduce his liabilities by BGN130 mln.

Several heads of major banks in Bulgaria, however, continue to lose their sleep only upon mentioning the name of Prokopiev. They have repeatedly been fooled or pressed in order to have patience and show understanding to the debtor. The debts of most of his companies are to two of the largest banks in the country – UniCredit Bulbank and DSK bank. Only one of the loans is worth BGN 171 mln. The liability to the foreign branch of the same financial institution amount to BGN 164.4 mln. The Alfa Finance Holding JSC is the largest debtor from the empire, with a liability of nearly BGN 130 mln to another large bank. A commercial enterprise in Silistra is put in pledge as a collateral. This is a relatively new credit trick for Bulgaria - a whole company with all its assets and liabilities to be pledged after a full evaluation of the enterprise.

Alpha Capital Management Ltd was put in pledge for a loan of BGN 39 mln, and even BGN 1 has not been repaid from this debt so far. The company is in a liquidation proceeding as of December 31, 2011. Another emblematic company of the oligarch - Economedia JSC, the publisher of the Capital and Dnevnik newspapres,  has a debt of BGN 1.7 mln to Alpha Bank Bulgaria (data as of June 2010). At the time when Prokopiev announced that he would move to Singapore because of death threats in the middle of 2010, he sold some 49% of the shares in his most favourite  company. The new owner is Theodore Zahov, Chairman of the BAIT (Bulgarian Association of Information Technologies) and creator of Spectrum Net. But the sold share was actually owned by Philip Harmandjiev, associate of the businessman, with whom he started his business in the early 90s of the twentieth century. Prokopiev retained the blocking quota. The question is, however, what gets the co-owner from the transaction after the entire commercial enterprise with the computers and the tiles has been pledged as a collateral? The debt itself increased 10 times in a year and a half and at the end of January 2012, the Capital and Dnevnik newspapers had to repay the amount of almost BGN 17 mln to the Greek bank.

The game with state-owned companies

Prokopiev found out a clever scheme to put in pledge for loans not only his own firms, but also state-owned companies, in which he has a small share. The businessman started resorting to this trick during the time of office of the tripartite coalition. As usual, he found a way to get the support of ministers and even of Prime Minister Sergei Stanishev. The scheme is simple and easy. He takes for example a 34% stake of a state-owned company and persuades the principal to pour a lot of money in it in the form of repairs and improvements. Then he pledges the company against a solid amount, which is remitted directly to his bank account. The loan has never been paid, and the State remains defrauded.

A rent of BGN 500,000 from the Plovdiv Airport

The Plovdiv Airport is an example of the implementation of this scheme. In December 2007, Prokopiev acquired some 58.08% of the company via the dubious privatisation of the airport in which the Swiss Tado AG company allegedly was used as a mailbox. Prokopiev seized the airport through his Alfa Finance Holding JSC. He promised to modernize the airport, but did not invest in it at all. Just the opposite, he started receiving up to BGN 18,000 in rents, according to a statement of former Transport Minister Petar Mutafchiev. Meanwhile, Prokopiev pledged the airport as a collateral for a loan from SG Expressbank. In April 2010, Ostap Bender sold his share to the Danish Nordic Airport Infrastructure ApS company. So, during the 28 months, in which Prokopiev was official majority owner of the airport, he received over BGN 504,000 from the State, shows his account. It is still unclear who will repay the borrowed money. 

Some BGN 130 mln paid back during the most severe crisis

In mid-2010 Prokopiev felt quite uneasy in Bulgaria and packed up to Singapore. It remains a mystery how in this tough time he managed to return a substantial part of his debts. Just in a year and a half during a severe economic crisis and the need for payment of the instalments on debts of BGN 600 mln, the firms from the empire of Prokopiev managed to reduce their liabilities by more than BGN 130 mln! So, at the beginning of this year the debts were no longer BGN 570 mln, but BGN 440.880 mln. The defaults for the same period were worth BGN 48.063 mln, which is also a substantial amount. Maybe someone will become intrigued by this strange prosperity of Prokopiev, in which there is no financial sense.

People, familiar with the activity of the businessman, say that his ingenuity is remarkable. According to them, shares have been transferred from the "healthy" companies (without loans) to companies with liabilities, "toxic" assets have been written off and in this way the loans have been restructured. Assets from some companies have been put in pledges to other companies, there were numerous mortgages and mergers of companies. Bankers do not have an interest in “spoiling" their balance sheets with the numerous defaults of the oligarch, share in secret prominent financiers.

A large sale of Prokopiev's assets

In order to find funds, with which to fool the lending banks and delay his actual bankruptcy, Prokopiev started to sell urgently his empire of assets. A year ago he parted with his luxury commercial park and commendable project dubbed Retail Park Plovdiv located in the city of Plovdiv. In fact, the US company Rockefeller Group bought the shopping mall in Plovidv, which the oligarch received along with Landmark Property, acquired by him in 2008. In fact, the amount of BGN 20 mln, which he took as a result of the sale of this real estate, was not enough for Ivo Prokopiev to cover his liabilities since BGN 10 mln per month was just the due bank interest. Therefore, the businessman put up for sale another eight of his companies holding land, buildings and undeveloped land in industrial zones. Besides, a hotel in the Greek resort Ierissos of Halkidiki was also auctioned.

The latest sale offer, declared by his company Alfa Finance Holding, was for Landmark Centre Varna, which was presented at a public auction in late February. Prokopiev set a sale price of BGN 6.7 mln for the building and its adjacent area of ​​6, 300 sq m. The British consultancy company JLL was appointed as the entity responsible for finding a purchaser of the luxury office building in downtown Varna, but its representative in Bulgaria, Andrew Pearson acknowledged that a weak interest was expressed in the transaction.

The auctioning of his real estates is not the only loss of the already collapsed Prokopiev's empire of wealth. More than a year ago, he was forced to part with his investments in the IT sector by selling to M-Tel company his telecom company Spectrum Net, which was acquired through the acquisition of Orbitel. In fact, Prokopiev and his partner Teodor Zahov set the sale price of Spectrum Net, which was auctioned along with Megalan - €70 mln. Besides, the financial oligarch also had to sell his media empire. As a result, his boutique TV Re-tv went bankrupt. He laid off dozens of newspaper reporters operating in his private newspapers Dnevnik and Capital daily and suspended almost all of his printed editions from the hitherto diversified portfolio managed by his Economedia local business media group. Finally, he sold his printing house with the argument that he no longer had strategic interests in this business sector.

His publicly stated retreat from the publishing activity, however, failed to prevent Ivo Prokopiev from taking over the Pari newspaper, without paying even a single BGN 1 for the authoritative business edition. Thus, by closing down his newspaper Dnevnik, he launched a new Capital daily at the publishing market. Journalists argue that the tricky transaction was concluded at the expense of the Swedish investor Bonnier Business Press, which bought Pari daily. For the prestigious Bulgarian brand, the Swedes received a purchase offer worth BGN 2 mln from the Bulgarian counterpart, but circles close to Prokopiev managed to persuade the Scandinavian company that solely its merger with the oligarch's editions would secure them good market positions in Bulgaria.

Besides, his private company Economedia managed to grab another €3 mln from the US Foundation America for Bulgaria, which granted him funds for his news website Dnevnik in support of the freedom of speech. Another BGN 3.1 mln were transferred to the companies of the debt-ridden businessman from the EU Funds under Operational Programme Competitiveness, while another BGN 150, 000 were extended to him under OP Human Resources.


The financial tricks of Kaolin JSC

Actually, Ivo Prokopiev became notorious as a prominent employer and a factor in the domestic business sector as an owner of Kaolin JSC, based in the Ruse village of Senovo. He acquired it via the so-called labor-management privatisation in 1999, when the company was closely linked to the circle "Lamb Heads" in the UDF (Union of Democratic Forces). The bulk of the transaction value was paid with compensatory bonds whose nominal price at that point was about BGN 0.10 each.

Similar to the other companies, the plant has large debts - in the middle of 2010 it owed to UniCredit Bulbank a liability worth BGN 72.389 mln. A year and a half later, the debt decreased by half to BGN 33 mln. The oligarch was very careful with its regular disbursement since as collateral for the loan borrowed by Kaolin JSC he mortgaged the enterprise on extraction of refractory clay, located in the town of Pleven. In addition to the granted loans, bank guarantees amounting to BGN 44 mln have been also extended.

And since Kaolin JSC is the only effective company in Prokopiev's portfolio, it was involved in the largest financial tricky transactions. Because of the ill fame of Kaolin JSC, the Interior Ministry and the Prosecution audited twice the notorious businessman. The first inspection was on the company's privatisation, while the second one referred to the machinations with the financial statements of the enterprise in its listing on the stock exchange in 2007. At that point, it proved out that because of reported forged profits, the value of the plant's shares were inflated artificially, while the stock market investors were defrauded with at least BGN 40 mln.

It is also alleged that because of this finical machinations, Prokopiev was inspected by the Prosecution as well. Standard daily, however, could not find any traces of both conducted investigations - neither in the Interior Ministry, nor the Prosecution. "Prokopiev has never been officially investigated simply because he was politically protected ever since the former right-wing government headed by Ivan Kostov, reckoned a former employee of the Interior Ministry from its Economic Department. As a result of the privatisation of Kaolin JSC, Prokopiev received also 5 concessions on reserves of quartz-kaolin raw materials for a period of 35 years. The value of the reserves is estimated at about €2 bn.

According to experts of the public club Ecoglasnost, who carefully examined the data from the mining of raw materials, as well as the prices of products derived from them, Prokopiev conceals at least BGN 20 mln in profit annually from the state. The analysis shows that the figures of the reported sales deviate manifold from the real financial results. According to the official data, overall 1.5 mln tonnes of products worth BGN 42 mln were extracted and processed from the 5 fields, but the financial reports do not mention the actual Kaolin's price of output per tonne. Insiders suggest that the actual price and turnover are twice as high.

Journalists team from Standard daily

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