29 November 2016

L1 update: Cukurova thwarts sale process by failing to take critical action to lift Telia injunction on shares

LetterOne (L1), the international investment business, headquartered in Luxembourg, today updates on the arbitration decision against Cukurova which it had hoped would end the deadlock of corporate governance of Turkcell.

In accordance with the international arbitration award of 29 July 2016 (which was amended on 19 September 2016), because Cukurova failed to elect to purchase L1’s shares within 60 days, it is treated as having elected to sell its shares in Cukurova Telecom Holdings Limited (“CTH”) to L1. Cukurova had until 28th November to complete the transaction.
In order to complete the transaction within the time-frame, Cukurova was required to take action to discharge or vary an injunction which prevents the transfer of the CTH shares, and which was put in place by British Virgin Islands (BVI) courts for the benefit of Telia, the Swedish telecoms company, following a separate international arbitration in 2011.
No such action has been taken by Cukurova to discharge or vary the BVI injunction over these CTH shares. The BVI court injunction was granted as Cukurova refused to pay an outstanding judgement debt to Telia which, with interest, now amounts to over $1.1 billion.
Having not taken action to vary the injunction on the shares, any buy-out by L1 of the CTH shares held by Cukurova would have put L1 in breach of the BVI injunction. 
There is therefore no legal means to purchase these shares and reinstate good corporate governance at Turkcell, without the injunction being lifted by Cukurova.
Cukurova's failure to honour its judgment debt to Telia and to discharge or vary the injunction has now put Cukurova in breach of the arbitration decision and frustrated the sales process
Alexey Reznikovich, L1 Technology's Managing Partner, said: 

“L1 has for some time been trying to find a resolution to this decade-long deadlock between the shareholders in Turkcell so that the company can be managed in a normal way for the benefit of all stakeholders.

The Turkish telecoms market has huge potential and Turkcell as the no. 1 operator is well positioned to capitalise on it.
The 10 days within which Cukurova was required to present the CTH shares for sale has now expired. They have taken no action – within this period - to discharge or vary the BVI injunction and free the shares for sale”.