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A1 and IBRC Special Liquidators Revise Asset Recovery Agreement to Take Full Control of Former Quinn International Property Assets

July 07, 2015. TAG: Investment

IBRC formed a joint venture company with A1, the Russian leading investment company and a member of Alfa Group Consortium, in Feb 2013 to recoup real estate assets in Russia and the Ukraine, which had been put beyond the reach of the Irish State owned institution through a series of complex mechanisms.

A1 has, through this joint venture company, assisted IBRC to assert its legal rights under its security by actively litigating and co-ordinating litigation in Russia and the Ukraine, obtaining physical control of assets, managing the assets and their returns and seeking to sell the assets.

As a result of the IBRC agreement with A1, control has been secured over Q Park which is a major logistics facility in the City of Kazan, the Kutuzoff Tower which is a Prime Office block in Moscow and the large Univermag Shopping Centre in Kiev.

The Special Liquidators of IBRC and A1 have now agreed to enter into a revised joint venture agreement which will facilitate the acquisition by IBRC of A1’s economic interest in recovered Russian and Ukrainian Quinn International Property Group assets.

Since the joint venture was established in 2013, as a result of the geo-political situation the Rouble and Ukrainian Hryvnia have fallen significantly against foreign currencies and commercial property values have plummeted.

Due to these factors the sale of recovered assets will not, in the view of the Special Liquidators following the receipt of specialist property advice, generate the level of interest or return in the immediate future that could be generated in the medium to long term once a stabilization occurs.

The current combined estimated value of the secured assets is up to $120 million. This compares with an estimated value in the region of $200m in 2013. Hence, it has been decided by the Special Liquidators and A1 to revise the joint venture agreement and that the assets will be held for later sale as and when the macroeconomic backdrop improves.

On April 9th 2015, a Memorandum of Understanding was agreed between the Special Liquidators of IBRC and A1 of Alfa Group Consortium. The commercial points of the Memorandum were reflected in the new co-operation agreement which was executed on the 6th of July.

Under the new agreement, A1 will sell shares which derive their value fr om an economic interest in the recovered assets and associated cash reserves and future rental income, together with recovery claims and recovery proceeds, for a payment of $34 million and a continuing opportunity to benefit from 20% of the value of any further assets recovered over the next six months.

By comparison A1 would receive a similar amount under the terms on the original joint venture agreement on the basis of disposal at today’s fair market value.

There are eight remaining unsecured assets. A1 and IBRC remains committed to recovering all assets however evidently this will be challenging due to the actions of the Quinn family and their associates as part of the admitted asset alienation scheme.

Kieran Wallace, IBRC Joint Special Liquidator said: “ A1 has done an excellent job of securing these assets wh ere all prior efforts of the Bank had failed. The joint venture approach has worked well. The revision of the joint venture agreement A1 makes commercial sense at this juncture as it is in the best interests of the State that these assets are not sold now at seriously depressed prices. We will continue to benefit from the income generated from the secured assets and to work hard to recover more assets which are the legitimate property of the Irish State.”

Alexander Vinokurov, CEO, A1, added: “The deal with IBRC is unprecedented for the Russian market. This proves A1’s unique expertise and experience in assisting foreign investors with distressed situations in the Russian Federation. We look forward to working on, and providing our professional support to, other foreign investors on similar projects in the future. In this unstable economic environment we are eager to take part in large-scale complex projects focused on protection of interests of foreign partners and recovery of their assets.

Eoin O'Leary, Irish Ambassador to the Russian Federation, stated: “During two years of practical cooperation between the Bank and А1, a serious success was achieved in recognizing the rights to all key real estate assets in both Russia and Ukraine that were illegally withdrawn from the appropriate owners and lenders. Legal proceedings were simultaneously held in numerous jurisdictions.

The Embassy has worked closely with A1 and IBRC to assist them in achieving the best result for the Irish taxpayer.

A1

A1 is one of the leading players on the investment market in Russia and the CIS making equity investments in various industries, pursuing the interests of its shareholders, clients and partners. A1 focuses on investment projects of two types: special situations and growth strategies. Alfa-Bank (Russia), TNK, VimpelCom, Perekrestok and Rosvodokanal Group were originally A1 projects that later became strategic businesses for Alfa Group as well as core companies for the wider Russian economy. A1’s long-term interests are aimed at establishing strong and competitive businesses, producing modern and very high quality goods and services to satisfy Russia’s growing demand, and developing efficient organizational and management systems.