Cukurova says Altimo thwarting efforts to recover Turkcell stake

Tue Jul 23, 2013 12:57pm EDT

* Cukurova seeks to recover Turkcell stake from Altimo

* Faces Sept. 9 deadline to raise $1.57 billion

* Says needs more time to fight adverse rulings in U.S.

* UK court to rule on extending deadline this week

By Estelle Shirbon

LONDON, July 23 (Reuters) - Turkey's Cukurova on Tuesday accused Russian investment firm Altimo of mounting a cynical legal campaign in New York to try to stop it from recovering a controlling stake in mobile phone operator Turkcell under the terms set by Britain's Privy Council court.

Cukurova is applying to the Privy Council for more time to pay $1.57 billion to Altimo to recover the stake. Altimo opposes the extension of the deadline, currently set for Sept. 9.

Altimo is the telecoms arm of Russian billionaire Mikhail Fridman's Alfa Group, while Cukurova is owned by one of Turkey's richest men, Mehmet Emin Karamehmet.

It is the latest chapter in a six-year dispute between Turkcell's major shareholders that has left Turkey's biggest mobile phone operator unable to agree the composition of its board, pay dividends or pursue a coherent growth strategy.

The dispute began in 2007 when Altimo appropriated Cukurova's Turkcell stake alleging that the Turkish firm had defaulted on a loan. After years of litigation, the Privy Council ruled on Jan. 30 that Cukurova should be given an opportunity to pay back the loan and recover the shares. It then set the detailed terms for that to happen on July 9.

Lawyers for Cukurova told the Privy Council on Tuesday the firm needed more time because it was appealing against an injunction obtained on April 18 by Altimo from a New York District Court prohibiting Cukurova from putting up the Turkcell stake as collateral in any new loan.

Cukurova is also appealing against another injunction, obtained by Altimo from the New York court on July 12, barring Altimo's own bank, Deutsche Bank, from accepting any payment from Cukurova in relation to the recovery of the Turkcell stake.

Cukurova's appeals are due to be heard by the Second Circuit of the U.S. Court of Appeal on Aug. 22 and judgment will come at a later date. The Turkish firm wants the Privy Council to extend the deadline for producing the $1.57 billion to 60 days after that U.S. appeal judgment, whenever it comes.

The Privy Council said it expected to hand down its judgment on whether to extend the deadline by the end of this week.

TALKS WITH BANKS

Lawyers for Altimo denied that the New York legal action had been designed to stop Cukurova from recovering the disputed Turkcell stake and argued that in any case Cukurova could not raise $1.57 billion.

"It is completely unrealistic to suppose that they will be able to pay when the time comes," said Iain Milligan, counsel for Alfa Telecom Turkey which is the unit of Altimo involved in the Turkcell dispute, in his submissions to the Privy Council.

Cukurova lawyers contradicted this.

"Cukurova had discussions with a number of potential lenders, a 'lead arranger' for a syndicated loan was appointed and a number of major banks expressed a willingness to participate in the syndicate," they wrote in a skeleton argument presented to the Privy Council for Tuesday's hearing.

They said that Altimo's legal moves in New York were "a transparent and cynical attempt" to stymie Cukurova's efforts to raise the funds.

Milligan denied this, telling the Privy Council that the New York legal action was part of a related but separate dispute involving another key Turkcell shareholder, Nordic telecoms group TeliaSonera.

TeliaSonera is trying to force Cukurova to comply with a 2011 ruling by a Swiss arbitration tribunal under which Cukurova was ordered to pay TeliaSonera $932 million in damages for reneging on a deal to sell the Nordic group its Turkcell stake.

Under a Joint Venture Agreement between TeliaSonera and Alfa, the Russian group has power of attorney to act on TeliaSonera's behalf in trying to enforce the Swiss ruling. Milligan said the firm's recent moves in the New York court were in pursuit of that goal.

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