Couch analytics #18. Default to creditors - let's look at an example

A crisis is a time when we implicitly expect to hear something bad: the bank has burst, the prices for herring have risen, the real estate market has changed. In a word, there are enough events, and journalists are beginning to look for negative things in order to confirm and show the crisis with their own eyes. But sometimes real facts are bizarrely transformed in the minds of readers into completely different information, which has a distant relation to reality. Sometimes ignorance of the subject affects, sometimes too good knowledge. The golden mean in moments of crisis is always not in honor, and those who adhere to it risk being considered too cautious.

Let's look at this situation using the example of the Svyaznoy company and the story that is unfolding before our eyes. If you start from the stove, then you need to remember how Maxim Nogotkov created the company, developed it, and as a result, a whole set of businesses was obtained, which was called the “Svyaznoy group of companies”. But this story is not so interesting, those who wish can google and find detailed interviews of both Maxim and his associates. The fact is that at the moment the Svyaznoy group of companies includes several companies. These are both the Svyaznoy retail chain and Svyaznoy Bank, as well as companies that are not at all well-known or are not associated with the main lines of business, for example, Pandora jewelry stores. To understand the overall picture, let me remind you that the group also includes the Enter online store, Svyaznoy Logistics, Svyaznoy Insurance, Svyaznoy Zagruzka, Mobile Telecommunications Service, Explay manufacturer. It is possible that I did not mention some small and insignificant areas, but they are not very interesting in the general outline of our story.

So, in the newspaper "Kommersant" dated November 10, there is a note that the Onexim group notified the Svyaznoy group of companies about the default. You can find the note here on the Kommersant website.

I hope you read the note so you don't have to retell it again. As a matter of fact, I note that, according to Kommersant, the net debt of the Svyaznoy group of companies to several banks is about $ 560 million. At the same time, Onexim is not the main creditor, as well as a number of other mentioned banks. In the past, Onexim tried to enter the asset management of Maxim Nogotkov, but then they could not agree on a price and on who was responsible for what. An attempt to default on a group of companies has a very definite meaning, it is necessary to shake the situation, to unbalance the businesses of a group of companies in order to try to grab the largest piece. In any case, I see the whole situation in this light. And do you know why?

Let's take a look, for example, at Pandora's jewelry business, which is heavily indebted to Sberbank and its investment company Sberbank CIB. According to market estimates, in May 2014, Maxim Nogotkov sold a third of CJSC Panclub to Sberbank CIB for 4.4 billion rubles, and received another 9.2 billion rubles in the form of a development loan. It is unlikely that Onexim can claim to manage these assets, this is extremely unlikely. Without knowing the exact structure and size of the debt, it is very difficult to think about who and what can receive by declaring a default on the obligations of the Svyaznoy group of companies. But let's consider a hypothetical scenario in which the management company of the holding gave away parts in its companies as collateral for loans, to someone a part of the bank, to someone a part of Enter, to someone something else. In the event of a default, that is, the impossibility of paying a loan or interest on a loan, according to the law, an external manager may appear in the company who will consider asset allocation scenarios in order to satisfy creditors as much as possible.

Without knowing how the loan agreements of the group of companies are legally executed, it is impossible to judge how much influence the management company can have on all businesses, and not on those that acted as collateral in specific transactions. My opinion and the experience of similar transactions in Russia say that very specific assets, which were described and evaluated, acted as collateral, no one pledged everything at once. That is, they could have pledged part of Svyaznoy's retail, part of Enter, part of the bank, and so on. Therefore, creditors cannot claim for each of the businesses, but only for individual ones. Legally, of course, they can try to pull off an operation in which they will try to prove that all the businesses that are part of the group of companies are responsible. But given that each of them has its own structure of large creditors, it will be difficult to do this. In a head-on collision between Onexim and Sberbank, I will bet on Sberbank, it has much more administrative resources, and in fact everything looks advantageous for them.

The first thing to understand in this situation is that the Svyaznoy group of companies has very different creditors, some of them are strategic, for example, Sberbank is one of them. Borrowing money is also an art, and a great one, because you can’t take it from one company, you will fall into direct dependence on it and pave the way for a hostile takeover in the future. Maxim Nogotkov has never had a lack of understanding of such simple things, so the debt structure is rather intricate, and what can be estimated from individual references over the past years says one thing: creditors are large financial companies, sometimes directly competing in their niches in the market. This gives a certain guarantee that none of the players will quickly be able to crush the Messenger for themselves.

In the past few years, Maxim Nogotkov has been actively looking for a buyer for the main resource - the Svyaznoy retail chain. The sale of retail could instantly cover the problems with loans and improve the business by reducing the debt burden. But there was no such buyer in Russia, the deal with AFK Sistema fell through at the last moment due to the arrest of Mr. Yevtushenkov and the case around Bashneft. In fact, Maxim Nogotkov solved all business problems simultaneously with this transaction, but it did not happen or was frozen for an indefinite period. In this situation, there were quite a lot of people who wanted to try to bite off the existing assets of Svyaznoy.

Undoubtedly, the Svyaznoy group of companies has an excessive debt load at any assessment, but the question is how it is distributed. In some assets, it is higher than in others. And so the letter from Michael Touch, the CEO of Svyaznoy retail, which he sent to partners, does not raise any questions in me, it sets out the real facts.

On my own behalf, I’ll add that despite all the rumors, Svyaznoy’s retail accounts for partners on time and within the time specified in the contracts, that is, there are simply no delays in payments or their non-fulfillment. I can't say anything about the other companies of the group, but everything is going well in retail from this point of view.

Now let's see what creditors can get and how they can improve the situation in the group of companies in order to improve the performance of the business as a whole. One of the most problematic assets was Enter, this investment project appeared as a promising direction that never took off, the amount of monthly losses is too large to continue developing it. In my opinion, it's time to shoot Enter, as this will free up $25-30 million in direct profit per year, which is currently going to cover the losses of the company (consider this my value judgment, which is made by rough estimates of what is happening in the company ).Another contender for the elimination is Explay, which no longer receives sufficient funding to purchase equipment in China, as a result, it spins on its own and does not have any negative impact on Svyaznoy's retail business. But it does not bring in the income that was in the past, when Svyaznoy retail sold Explay in large volumes. Today, it is more profitable for retailers to put B-brands that are not affiliated with the company, since having a commodity loan from 60 to 120 days, they manage to sell the goods much faster and scroll through the money. 3,219 sqm of Residential Plot in Kigali, Rwanda And you don't have to invest your money in production, that is, the benefits from third-party companies are much higher. Therefore, Explay will either learn to live without the Svyaznoy channel, in which it had a certain advantage, or will play a completely inconspicuous role in the market. This has always been a flaw in such companies.

If we go completely empirically, then we can assume that in addition to the efforts already made to shrink Svyaznoy's operations, it will be possible to reduce the number of retail outlets, and this will give an immediate effect for the company, free up additional resources, allow servicing loans, and so on . But in the end it will lead to a decrease in turnover, and at the same time will drop the entire market. Oddly enough, no one is interested in this, the Euroset will suffer first of all, which will also be forced to reduce the number of outlets. The existing balance between Svyaznoy and Euroset gives the market the opportunity to live in a measured way, if it is violated, it is difficult to predict the final result of what will happen.

But back to reality. It is possible that what was stated above seemed to someone a Chinese letter, but for someone the data, on the contrary, turned out to be insufficient. I will say this - I do not believe that in the current situation, the retail project of Svyaznoy is under attack from creditors. On the contrary, this asset is the prize they will fight for. Moreover, the struggle will take place with the use of all means and opportunities, but it is unlikely to reach a stage that can be characterized by the phrase "So don't get you to anyone." With a high degree of probability, Maxim Nogotkov will lose control over the management company and the retail project. It is possible that in the near future this will lead to a change in a number of top managers in Svyaznoy, the emergence of new faces. But it is difficult to assume that a radical breakdown of the retail project will begin.Today, this project is quite coping with its tasks within the existing market and is trying to squeeze the maximum out of it. Moreover, no one on the market is interested in the disappearance or a strong weakening of Svyaznoy, major players represented by Euroset or operators understand that negative stories around Svyaznoy will instantly increase the cost of loans for them, increase risks and ultimately reduce the profitability of operations. And there is simply nowhere to raise retail prices, they are at the maximum level. In total, even if Svyaznoy's retail has serious problems, it will be pulled up. Moreover, one must understand that the same Sberbank, as one of the main creditors, will not be ready to lose its billions, therefore it will support the project. Thus, the “conclusion” that I heard from several people today regarding and in the wake of the publication in Kommersant that Svyaznoy is not a tenant, bankrupt and further down the list, is not at all a fact in any form. People mix different companies from the group into one pile, do not understand the structure of the debt (it is not transparent), do not think that the strength of creditors and their tasks vary greatly. All together gives us a completely ambiguous picture.

I'm not ready to argue that Svyaznoy retail will feel great in the foreseeable future. It is possible that the negative information around the company will affect its position. But specifically at the moment, it’s definitely not worth talking about the fact that Svyaznoy’s retail has serious problems. A group of companies has them, as well as quite specific businesses, parts of which act as collateral to creditors. But the retail of Svyaznoy stands apart, and this storm may well bypass it, since the creators worried about it from the very beginning. But it is also an almost fait accompli that Maxim Nogotkov will lose control of the group of companies. This is sad for him, but the life of companies will not stop at this, but will continue.

Couch analytics #18. Default to creditors - let's look at an example

A crisis is a time when we implicitly expect to hear something bad: the bank has burst, the prices for herring have risen, the real estate market has changed. In a word, there are enough events, and journalists are starting to look for negative things in order to confirm and show the crisis with their own eyes. But sometimes real facts are bizarrely transformed in the minds of readers into completely different information, which has a distant relation to reality. Sometimes ignorance of the subject affects, sometimes too good knowledge. The golden mean in moments of crisis is always not in honor, and those who adhere to it risk being considered too cautious.

Let's look at this situation using the example of the Svyaznoy company and the story that is unfolding before our eyes. If you start from the stove, then you need to remember how Maxim Nogotkov created the company, developed it, and as a result, a whole set of businesses was obtained, which was called the “Svyaznoy group of companies”. But this story is not so interesting, those who wish can google and find detailed interviews of both Maxim and his associates. The fact is that at the moment the Svyaznoy group of companies includes several companies. These are both the Svyaznoy retail chain and Svyaznoy Bank, as well as companies that are not at all well-known or are not associated with the main lines of business, for example, Pandora jewelry stores. To understand the overall picture, let me remind you that the group also includes the Enter online store, Svyaznoy Logistics, Svyaznoy Insurance, Svyaznoy Zagruzka, Mobile Telecommunications Service, Explay manufacturer. It is possible that I did not mention some small and insignificant areas, but they are not very interesting in the general outline of our story.

So, in the newspaper "Kommersant" dated November 10, there is a note that the Onexim group notified the Svyaznoy group of companies about the default. You can find the note here on the Kommersant website.

I hope you read the note so you don't have to retell it again. As a matter of fact, I note that, according to Kommersant, the net debt of the Svyaznoy group of companies to several banks is about $ 560 million. At the same time, Onexim is not the main creditor, as well as a number of other mentioned banks. In the past, Onexim tried to enter the asset management of Maxim Nogotkov, but then they could not agree on a price and on who was responsible for what. An attempt to default on a group of companies has a very definite meaning, it is necessary to shake the situation, to unbalance the businesses of a group of companies in order to try to grab the largest piece. In any case, I see the whole situation in this light. And do you know why?

Let's take a look, for example, at Pandora's jewelry business, which is heavily indebted to Sberbank and its investment company Sberbank CIB. According to market estimates, in May 2014, Maxim Nogotkov sold a third of CJSC Panclub to Sberbank CIB for 4.4 billion rubles, and received another 9.2 billion rubles in the form of a development loan. It is unlikely that Onexim can claim to manage these assets, this is extremely unlikely. Without knowing the exact structure and size of the debt, it is very difficult to think about who and what can receive by declaring a default on the obligations of the Svyaznoy group of companies. But let's consider a hypothetical scenario in which the management company of the holding gave away parts in its companies as collateral for loans, to someone a part of the bank, to someone a part of Enter, to someone something else. In the event of a default, that is, the impossibility of paying a loan or interest on a loan, according to the law, an external manager may appear in the company who will consider asset allocation scenarios in order to satisfy creditors as much as possible.

Without knowing how the loan agreements of the group of companies are legally executed, it is impossible to judge how much influence the management company can have on all businesses, and not on those that acted as collateral in specific transactions. My opinion and the experience of similar transactions in Russia say that very specific assets, which were described and evaluated, acted as collateral, no one pledged everything at once. That is, they could have pledged part of Svyaznoy's retail, part of Enter, part of the bank, and so on. Therefore, creditors cannot claim for each of the businesses, but only for individual ones. Legally, of course, they can try to pull off an operation in which they will try to prove that all the businesses that are part of the group of companies are responsible. But given that each of them has its own structure of large creditors, it will be difficult to do this. In a head-on collision between Onexim and Sberbank, I will bet on Sberbank, it has much more administrative resources, and in fact everything looks advantageous for them.

The first thing to understand in this situation is that the Svyaznoy group of companies has very different creditors, some of them are strategic, for example, Sberbank is one of them. Borrowing money is also an art, and a great one, because you can’t take it from one company, you will fall into direct dependence on it and pave the way for a hostile takeover in the future. Maxim Nogotkov has never had a lack of understanding of such simple things, so the debt structure is rather intricate, and what can be estimated from individual references over the past years says one thing: creditors are large financial companies, sometimes directly competing in their niches in the market. This gives a certain guarantee that none of the players will quickly be able to crush the Messenger for themselves.

In the past few years, Maxim Nogotkov has been actively looking for a buyer for the main resource - the Svyaznoy retail chain. The sale of retail could instantly cover the problems with loans and improve the business by reducing the debt burden. But there was no such buyer in Russia, the deal with AFK Sistema fell through at the last moment due to the arrest of Mr. Yevtushenkov and the case around Bashneft. In fact, Maxim Nogotkov solved all business problems simultaneously with this transaction, but it did not happen or was frozen for an indefinite period. In this situation, there were quite a lot of people who wanted to try to bite off the existing assets of Svyaznoy.

Undoubtedly, the Svyaznoy group of companies has an excessive debt load at any assessment, but the question is how it is distributed. In some assets, it is higher than in others. And so the letter from Michael Touch, the CEO of Svyaznoy retail, which he sent to partners, does not raise any questions in me, it sets out the real facts.

On my own behalf, I’ll add that despite all the rumors, Svyaznoy’s retail accounts for partners on time and within the time specified in the contracts, that is, there are simply no delays in payments or their non-fulfillment. I can't say anything about the other companies of the group, but everything is going well in retail from this point of view.

Now let's see what creditors can get and how they can improve the situation in the group of companies in order to improve the performance of the business as a whole. One of the most problematic assets was Enter, this investment project appeared as a promising direction that never took off, the amount of monthly losses is too large to continue developing it. In my opinion, it's time to shoot Enter, as this will free up $25-30 million in direct profit per year, which is currently going to cover the losses of the company (consider this my value judgment, which is made by rough estimates of what is happening in the company ).Another contender for the elimination is Explay, which no longer receives sufficient funding to purchase equipment in China, as a result, it spins on its own and does not have any negative impact on Svyaznoy's retail business. But it does not bring in the income that was in the past, when Svyaznoy retail sold Explay in large volumes. Today, it is more profitable for retailers to put B-brands that are not affiliated with the company, since having a commodity loan from 60 to 120 days, they manage to sell the goods much faster and scroll through the money. 3,219 sqm of Residential Plot in Kigali, Rwanda And you don't have to invest your money in production, that is, the benefits from third-party companies are much higher. Therefore, Explay will either learn to live without the Svyaznoy channel, in which it had a certain advantage, or will play a completely inconspicuous role in the market. This has always been a flaw in such companies.

If we go completely empirically, then we can assume that in addition to the efforts already made to shrink Svyaznoy's operations, it will be possible to reduce the number of retail outlets, and this will give an immediate effect for the company, free up additional resources, allow servicing loans, and so on . But in the end it will lead to a decrease in turnover, and at the same time will drop the entire market. Oddly enough, no one is interested in this, the Euroset will suffer first of all, which will also be forced to reduce the number of outlets. The existing balance between Svyaznoy and Euroset gives the market the opportunity to live in a measured way, if it is violated, it is difficult to predict the final result of what will happen.

But back to reality. It is possible that what was stated above seemed to someone a Chinese letter, but for someone the data, on the contrary, turned out to be insufficient. I will say this - I do not believe that in the current situation, the retail project of Svyaznoy is under attack from creditors. On the contrary, this asset is the prize they will fight for. Moreover, the struggle will take place with the use of all means and opportunities, but it is unlikely to reach a stage that can be characterized by the phrase "So don't get you to anyone." With a high degree of probability, Maxim Nogotkov will lose control over the management company and the retail project. It is possible that in the near future this will lead to a change in a number of top managers in Svyaznoy, the emergence of new faces. But it is difficult to assume that a radical breakdown of the retail project will begin.Today, this project is quite coping with its tasks within the existing market and is trying to squeeze the maximum out of it. Moreover, no one on the market is interested in the disappearance or a strong weakening of Svyaznoy, major players represented by Euroset or operators understand that negative stories around Svyaznoy will instantly increase the cost of loans for them, increase risks and ultimately reduce the profitability of operations. And there is simply nowhere to raise retail prices, they are at the maximum level. In total, even if Svyaznoy's retail has serious problems, it will be pulled up. Moreover, one must understand that the same Sberbank, as one of the main creditors, will not be ready to lose its billions, therefore it will support the project. Thus, the “conclusion” that I heard from several people today regarding and in the wake of the publication in Kommersant that Svyaznoy is not a tenant, bankrupt and further down the list, is not at all a fact in any form. People mix different companies from the group into one pile, do not understand the structure of the debt (it is not transparent), do not think that the strength of creditors and their tasks vary greatly. All together gives us a completely ambiguous picture.

I'm not ready to argue that Svyaznoy retail will feel great in the foreseeable future. It is possible that the negative information around the company will affect its position. But specifically at the moment, it’s definitely not worth talking about the fact that Svyaznoy’s retail has serious problems. A group of companies has them, as well as quite specific businesses, parts of which act as collateral to creditors. But the retail of Svyaznoy stands apart, and this storm may well bypass it, since the creators worried about it from the very beginning. But it is also an almost fait accompli that Maxim Nogotkov will lose control of the group of companies. This is sad for him, but the life of companies will not stop at this, but will continue.

Couch analytics #18. Default to creditors - let's look at an example

A crisis is a time when we implicitly expect to hear something bad: the bank has burst, the prices for herring have risen, the real estate market has changed. In a word, there are enough events, and journalists are starting to look for negative things in order to confirm and show the crisis with their own eyes. But sometimes real facts are bizarrely transformed in the minds of readers into completely different information, which has a distant relation to reality. Sometimes ignorance of the subject affects, sometimes too good knowledge. The golden mean in moments of crisis is always not in honor, and those who adhere to it risk being considered too cautious.

Let's look at this situation using the example of the Svyaznoy company and the story that is unfolding before our eyes. If you start from the stove, then you need to remember how Maxim Nogotkov created the company, developed it, and as a result, a whole set of businesses was obtained, which was called the “Svyaznoy group of companies”. But this story is not so interesting, those who wish can google and find detailed interviews of both Maxim and his associates. The fact is that at the moment the Svyaznoy group of companies includes several companies. These are both the Svyaznoy retail chain and Svyaznoy Bank, as well as companies that are not at all well-known or are not associated with the main lines of business, for example, Pandora jewelry stores. To understand the overall picture, let me remind you that the group also includes the Enter online store, Svyaznoy Logistics, Svyaznoy Insurance, Svyaznoy Zagruzka, Mobile Telecommunications Service, Explay manufacturer. It is possible that I did not mention some small and insignificant areas, but they are not very interesting in the general outline of our story.

So, in the newspaper "Kommersant" dated November 10, there is a note that the Onexim group notified the Svyaznoy group of companies about the default. You can find the note here on the Kommersant website.

I hope you read the note so you don't have to retell it again. As a matter of fact, I note that, according to Kommersant, the net debt of the Svyaznoy group of companies to several banks is about $ 560 million. At the same time, Onexim is not the main creditor, as well as a number of other mentioned banks. In the past, Onexim tried to enter the asset management of Maxim Nogotkov, but then they could not agree on a price and on who was responsible for what. An attempt to default on a group of companies has a very definite meaning, it is necessary to shake the situation, to unbalance the businesses of a group of companies in order to try to grab the largest piece. In any case, I see the whole situation in this light. And do you know why?

Let's take a look, for example, at Pandora's jewelry business, which is heavily indebted to Sberbank and its investment company Sberbank CIB. According to market estimates, in May 2014, Maxim Nogotkov sold a third of CJSC Panclub to Sberbank CIB for 4.4 billion rubles, and received another 9.2 billion rubles in the form of a development loan. It is unlikely that Onexim can claim to manage these assets, this is extremely unlikely. Without knowing the exact structure and size of the debt, it is very difficult to think about who and what can receive by declaring a default on the obligations of the Svyaznoy group of companies. But let's consider a hypothetical scenario in which the management company of the holding gave away parts in its companies as collateral for loans, to someone a part of the bank, to someone a part of Enter, to someone something else. In the event of a default, that is, the impossibility of paying a loan or interest on a loan, according to the law, an external manager may appear in the company who will consider asset allocation scenarios in order to satisfy creditors as much as possible.

Without knowing how the loan agreements of the group of companies are legally executed, it is impossible to judge how much influence the management company can have on all businesses, and not on those that acted as collateral in specific transactions. My opinion and the experience of similar transactions in Russia say that very specific assets, which were described and evaluated, acted as collateral, no one pledged everything at once. That is, they could have pledged part of Svyaznoy's retail, part of Enter, part of the bank, and so on. Therefore, creditors cannot claim for each of the businesses, but only for individual ones. Legally, of course, they can try to pull off an operation in which they will try to prove that all the businesses that are part of the group of companies are responsible. But given that each of them has its own structure of large creditors, it will be difficult to do this. In a head-on collision between Onexim and Sberbank, I will bet on Sberbank, it has much more administrative resources, and in fact everything looks advantageous for them.

The first thing to understand in this situation is that the Svyaznoy group of companies has very different creditors, some of them are strategic, for example, Sberbank is one of them. Borrowing money is also an art, and a great one, because you can’t take it from one company, you will fall into direct dependence on it and pave the way for a hostile takeover in the future. Maxim Nogotkov has never had a lack of understanding of such simple things, so the debt structure is rather intricate, and what can be estimated from individual references over the past years says one thing: creditors are large financial companies, sometimes directly competing in their niches in the market. This gives a certain guarantee that none of the players will quickly be able to crush the Messenger for themselves.

In the past few years, Maxim Nogotkov has been actively looking for a buyer for the main resource - the Svyaznoy retail chain. The sale of retail could instantly cover the problems with loans and improve the business by reducing the debt burden. But there was no such buyer in Russia, the deal with AFK Sistema fell through at the last moment due to the arrest of Mr. Yevtushenkov and the case around Bashneft. In fact, Maxim Nogotkov solved all business problems simultaneously with this transaction, but it did not happen or was frozen for an indefinite period. In this situation, there were quite a few who wanted to try to bite off the existing assets of the Messenger.

Undoubtedly, the Svyaznoy group of companies has an excessive debt load at any assessment, but the question is how it is distributed. In some assets, it is higher than in others. And so the letter from Michael Touch, the CEO of Svyaznoy retail, which he sent to partners, does not raise any questions in me, it sets out the real facts.

On my own behalf, I’ll add that despite all the rumors, Svyaznoy’s retail accounts for partners on time and within the time specified in the contracts, that is, there are simply no delays in payments or their non-fulfillment. I can't say anything about the other companies of the group, but everything is going well in retail from this point of view.

Now let's see what creditors can get and how they can improve the situation in the group of companies in order to improve the performance of the business as a whole. One of the most problematic assets was Enter, this investment project appeared as a promising direction that never took off, the amount of monthly losses is too large to continue developing it. In my opinion, it's time to shoot Enter, as this will free up $25-30 million in direct profit per year, which is currently going to cover the losses of the company (consider this my value judgment, which is made by rough estimates of what is happening in the company ).Another contender for the elimination is Explay, which no longer receives sufficient funding to purchase equipment in China, as a result, it spins on its own and does not have any negative impact on Svyaznoy's retail business. But it does not bring in the income that was in the past, when Svyaznoy retail sold Explay in large volumes. Today, it is more profitable for retailers to put B-brands that are not affiliated with the company, since having a commodity loan from 60 to 120 days, they manage to sell the goods much faster and scroll through the money. 3,219 sqm of Residential Plot in Kigali, Rwanda And you don't have to invest your money in production, that is, the benefits from third-party companies are much higher. Therefore, Explay will either learn to live without the Svyaznoy channel, in which it had a certain advantage, or will play a completely inconspicuous role in the market. This has always been a flaw in such companies.

If we go completely empirically, then we can assume that in addition to the efforts already made to shrink Svyaznoy's operations, it will be possible to reduce the number of retail outlets, and this will give an immediate effect for the company, free up additional resources, allow servicing loans, and so on . But in the end it will lead to a decrease in turnover, and at the same time will drop the entire market. Oddly enough, no one is interested in this, first of all the Euroset will suffer, which will also be forced to reduce the number of outlets. The existing balance between Svyaznoy and Euroset gives the market the opportunity to live in a measured way, if it is violated, it is difficult to predict the final result of what will happen.

But back to reality. It is possible that what was stated above seemed to someone a Chinese letter, but for someone the data, on the contrary, turned out to be insufficient. I will say this - I do not believe that in the current situation, the retail project of Svyaznoy is under attack from creditors. On the contrary, this asset is the prize they will fight for. Moreover, the struggle will take place with the use of all means and possibilities, but it is unlikely to reach a stage that can be characterized by the phrase "So don't get you to anyone." With a high degree of probability, Maxim Nogotkov will lose control over the management company and the retail project. It is possible that in the near future this will lead to a change in a number of top managers in Svyaznoy, the emergence of new faces. But it is difficult to assume that a radical breakdown of the retail project will begin.Today, this project is quite coping with its tasks within the existing market and is trying to squeeze the maximum out of it. Moreover, no one on the market is interested in the disappearance or a strong weakening of Svyaznoy, major players represented by Euroset or operators understand that negative stories around Svyaznoy will instantly increase the cost of loans for them, increase risks and ultimately reduce the profitability of operations. And there is simply nowhere to raise retail prices, they are at the maximum level. In total, even if Svyaznoy's retail has serious problems, it will be pulled up. Moreover, one must understand that the same Sberbank, as one of the main creditors, will not be ready to lose its billions, therefore it will support the project. Thus, the “conclusion” that I heard from several people today regarding and in the wake of the publication in Kommersant that Svyaznoy is not a tenant, bankrupt and further down the list, is not at all a fact in any form. People mix different companies from the group into one pile, do not understand the structure of the debt (it is not transparent), do not think that the strength of creditors and their tasks vary greatly. All together gives us a completely ambiguous picture.

I'm not ready to argue that Svyaznoy retail will feel great in the foreseeable future. It is possible that the negative information around the company will affect its position. But specifically at the moment, it’s definitely not worth talking about the fact that Svyaznoy’s retail has serious problems. A group of companies has them, as well as quite specific businesses, parts of which act as collateral to creditors. But the retail of Svyaznoy stands apart, and this storm may well bypass it, since the creators worried about it from the very beginning. But it is also an almost fait accompli that Maxim Nogotkov will lose control of the group of companies. This is sad for him, but the life of companies will not stop at this, but will continue.

Couch analytics #18. Default to creditors - let's look at an example

A crisis is a time when we implicitly expect to hear something bad: the bank has burst, the prices for herring have risen, the real estate market has changed. In a word, there are enough events, and journalists are starting to look for negative things in order to confirm and show the crisis with their own eyes. But sometimes real facts are bizarrely transformed in the minds of readers into completely different information, which has a distant relation to reality. Sometimes ignorance of the subject affects, sometimes too good knowledge. The golden mean in moments of crisis is always not in honor, and those who adhere to it risk being considered too cautious.

Let's look at this situation using the example of the Svyaznoy company and the story that is unfolding before our eyes. If you start from the stove, then you need to remember how Maxim Nogotkov created the company, developed it, and as a result, a whole set of businesses was obtained, which was called the “Svyaznoy group of companies”. But this story is not so interesting, those who wish can google and find detailed interviews of both Maxim and his associates. The fact is that at the moment the Svyaznoy group of companies includes several companies. These are both the Svyaznoy retail chain and Svyaznoy Bank, as well as companies that are not at all well-known or are not associated with the main lines of business, for example, Pandora jewelry stores. To understand the overall picture, let me remind you that the group also includes the Enter online store, Svyaznoy Logistics, Svyaznoy Insurance, Svyaznoy Zagruzka, Mobile Telecommunications Service, Explay manufacturer. It is possible that I did not mention some small and insignificant areas, but they are not very interesting in the general outline of our story.

So, in the newspaper "Kommersant" dated November 10, there is a note that the Onexim group notified the Svyaznoy group of companies about the default. You can find the note here on the Kommersant website.

I hope you read the note so you don't have to retell it again. As a matter of fact, I note that, according to Kommersant, the net debt of the Svyaznoy group of companies to several banks is about $ 560 million. At the same time, Onexim is not the main creditor, as well as a number of other mentioned banks. In the past, Onexim tried to enter the asset management of Maxim Nogotkov, but then they could not agree on a price and on who was responsible for what. An attempt to default on a group of companies has a very definite meaning, it is necessary to shake the situation, to unbalance the businesses of a group of companies in order to try to grab the largest piece. In any case, I see the whole situation in this light. And do you know why?

Let's take a look, for example, at Pandora's jewelry business, which is heavily indebted to Sberbank and its investment company Sberbank CIB. According to market estimates, in May 2014, Maxim Nogotkov sold a third of CJSC Panclub to Sberbank CIB for 4.4 billion rubles, and received another 9.2 billion rubles in the form of a development loan. It is unlikely that Onexim can claim to manage these assets, this is extremely unlikely. Without knowing the exact structure and size of the debt, it is very difficult to think about who and what can receive by declaring a default on the obligations of the Svyaznoy group of companies.But let's consider a hypothetical scenario in which the management company of the holding gave away parts in its companies as collateral for loans, to someone a part of the bank, to someone a part of Enter, to someone something else. In the event of a default, that is, the impossibility of paying a loan or interest on a loan, according to the law, an external manager may appear in the company who will consider asset allocation scenarios in order to satisfy creditors as much as possible.

Without knowing how the loan agreements of the group of companies are legally executed, it is impossible to judge how much influence the management company can have on all businesses, and not on those that acted as collateral in specific transactions. My opinion and the experience of similar transactions in Russia say that very specific assets, which were described and evaluated, acted as collateral, no one pledged everything at once. That is, they could have pledged part of Svyaznoy's retail, part of Enter, part of the bank, and so on. Therefore, creditors cannot claim for each of the businesses, but only for individual ones. Legally, of course, they can try to pull off an operation in which they will try to prove that all the businesses that are part of the group of companies are responsible. But given that each of them has its own structure of large creditors, it will be difficult to do this. In a head-on collision between Onexim and Sberbank, I will bet on Sberbank, it has much more administrative resources, and in fact everything looks advantageous for them.

The first thing to understand in this situation is that the Svyaznoy group of companies has very different creditors, some of them are strategic, for example, Sberbank is one of them. Borrowing money is also an art, and a great one, because you can’t take it from one company, you will fall into direct dependence on it and pave the way for a hostile takeover in the future. Maxim Nogotkov has never had a lack of understanding of such simple things, so the debt structure is rather intricate, and what can be estimated from individual references over the past years says one thing: creditors are large financial companies, sometimes directly competing in their niches in the market. This gives a certain guarantee that none of the players will quickly be able to crush the Messenger for themselves.

In the past few years, Maxim Nogotkov has been actively looking for a buyer for the main resource - the Svyaznoy retail chain. The sale of retail could instantly cover the problems with loans and improve the business by reducing the debt burden. But there was no such buyer in Russia, the deal with AFK Sistema fell through at the last moment due to the arrest of Mr. Yevtushenkov and the case around Bashneft. In fact, Maxim Nogotkov solved all business problems simultaneously with this transaction, but it did not happen or was frozen for an indefinite period. In this situation, there were quite a lot of people who wanted to try to bite off the existing assets of Svyaznoy.

Undoubtedly, the Svyaznoy group of companies has an excessive debt load at any assessment, but the question is how it is distributed. In some assets, it is higher than in others. And so the letter from Michael Touch, the CEO of Svyaznoy retail, which he sent to partners, does not raise any questions in me, it sets out the real facts.

On my own behalf, I’ll add that despite all the rumors, Svyaznoy’s retail accounts for partners on time and within the time specified in the contracts, that is, there are simply no delays in payments or their non-fulfillment. I can't say anything about the other companies of the group, but everything is going well in retail from this point of view.

Now let's see what creditors can get and how they can improve the situation in the group of companies in order to improve the performance of the business as a whole. One of the most problematic assets was Enter, this investment project appeared as a promising direction that never took off, the amount of monthly losses is too large to continue developing it. In my opinion, it's time to shoot Enter, as this will free up $25-30 million in direct profit per year, which is currently going to cover the losses of the company (consider this my value judgment, which is made by rough estimates of what is happening in the company ). Another contender for the elimination is Explay, which no longer receives sufficient funding to purchase equipment in China, as a result, it spins on its own and does not have any negative impact on Svyaznoy's retail business.But it does not bring in the income that was in the past, when Svyaznoy retail sold Explay in large volumes. Today, it is more profitable for retailers to put B-brands that are not affiliated with the company, since having a commodity loan from 60 to 120 days, they manage to sell the goods much faster and scroll through the money. 3,219 sqm of Residential Plot in Kigali, Rwanda And you don't have to invest your money in production, which means that the benefits from third-party companies are much higher. Therefore, Explay will either learn to live without the Svyaznoy channel, in which it had a certain advantage, or will play a completely inconspicuous role in the market. This has always been a flaw in such companies.

Now let's look at what lenders can get and how they can improve the situation in the group of companies in order to improve the performance of the business as a whole. One of the most problematic assets was Enter, this investment project appeared as a promising direction that never took off, the amount of monthly losses is too large to continue developing it. In my opinion, it's time to shoot Enter, as this will free up $25-30 million in direct profit per year, which is currently going to cover the losses of the company (consider this my value judgment, which is made by rough estimates of what is happening in the company ). Another contender for the elimination is Explay, which no longer receives sufficient funding to purchase equipment in China, as a result, it spins on its own and does not have any negative impact on Svyaznoy's retail business. But it does not bring in the income that was in the past, when Svyaznoy retail sold Explay in large volumes. Today, it is more profitable for retailers to put B-brands that are not affiliated with the company, since having a commodity loan from 60 to 120 days, they manage to sell the goods much faster and scroll through the money. 3,219 sqm of Residential Plot in Kigali, Rwanda 3,219 sqm of Residential Plot in Kigali, Rwanda And there is no need to invest your money in production, that is, the benefits from third-party companies are much higher. Therefore, Explay will either learn to live without the Svyaznoy channel, in which it had a certain advantage, or will play a completely inconspicuous role in the market. This has always been the downside of these companies.

If we go completely empirically, then we can assume that in addition to the efforts already made to shrink Svyaznoy's operations, it will be possible to reduce the number of retail outlets, and this will give an immediate effect for the company, free up additional resources, allow servicing loans, and so on . But in the end it will lead to a decrease in turnover, and at the same time will drop the entire market. Oddly enough, no one is interested in this, the Euroset will suffer first of all, which will also be forced to reduce the number of outlets. The existing balance between Svyaznoy and Euroset gives the market the opportunity to live in a measured way, if it is violated, it is difficult to predict the final result of what will happen.

But back to reality. It is possible that what was stated above seemed to someone a Chinese letter, but for someone the data, on the contrary, turned out to be insufficient. I will say this - I do not believe that in the current situation, the retail project of Svyaznoy is under attack from creditors. On the contrary, this asset is the prize they will fight for. Moreover, the struggle will take place with the use of all means and opportunities, but it is unlikely to reach a stage that can be characterized by the phrase "So don't get you to anyone." With a high degree of probability, Maxim Nogotkov will lose control over the management company and the retail project. It is possible that in the near future this will lead to a change in a number of top managers in Svyaznoy, the emergence of new faces. But it is difficult to assume that a radical breakdown of the retail project will begin. Today, this project is quite coping with its tasks within the existing market and is trying to squeeze the maximum out of it. Moreover, no one on the market is interested in the disappearance or a strong weakening of Svyaznoy, major players represented by Euroset or operators understand that negative stories around Svyaznoy will instantly increase the cost of loans for them, increase risks and ultimately reduce the profitability of operations. And there is simply nowhere to raise retail prices, they are at the maximum level. In total, even if Svyaznoy's retail has serious problems, it will be pulled up. Moreover, one must understand that the same Sberbank, as one of the main creditors, will not be ready to lose its billions, therefore it will support the project. Thus, the “conclusion” that I heard from several people today regarding and in the wake of the publication in Kommersant that Svyaznoy is not a tenant, bankrupt and further down the list, is not at all a fact in any form. People mix different companies from the group into one pile, do not understand the structure of the debt (it is not transparent), do not think that the strength of creditors and their tasks vary greatly. All together gives us a completely ambiguous picture.

I'm not ready to argue that Svyaznoy retail will feel great in the foreseeable future. It is possible that the negative information around the company will affect its position. But specifically at the moment, it’s definitely not worth talking about the fact that Svyaznoy’s retail has serious problems. A group of companies has them, as well as quite specific businesses, parts of which act as collateral to creditors. But the retail of Svyaznoy stands apart, and this storm may well bypass it, since the creators worried about it from the very beginning. But it is also an almost fait accompli that Maxim Nogotkov will lose control of the group of companies. This is sad for him, but the life of companies will not stop at this, but will continue.