Ascent of Bulgarian TIM

By Ivan Mihalev

Bulgarian Varna-based holding TIM is entering a new stage of its existence. After managing to accumulate a significant bunch of assets over a short period, the company embarked on a restructuring of part of its business. Some are wrongly considering this as the next in line attempt to legalise the group's business. The truth is that TIM's legalisation started much earlier and has long been achieved at least at the level of state institutions. With more than 150 companies and almost 10,000 employees working in the group's various divisions, the holding can vie for the status of one of Bulgaria's most serious economic structures. TIM's influence in various sectors of the economy, for example in the grain trade, is so far-reaching that the company could easily play with grain prices on a national scale. Any Bulgarian government or authority could hardly neglect the concentration of such significant economic power.

The rapid expansion of the company was pre-conditioned by TIM's late debut in the world of big business. At the time when other economic groups were privatising state-owned companies in bulk, the former marines were still fighting for space with other power groups in Varna. It is much more difficult to enter a market in which the turf has already been distributed especially when one has a negative image behind one's back.

The owners of TIM hate hearing their holding being called a grouping, and do not tolerate comparisons with other power groups, which were disbanded, such as VIS 2 and SIC. The difference between TIM and the other three-letter groups is that TIM does not do everything for money, a TIM chief was quoted as saying some time ago. The success of the corporation is based on persistency and not on one-off strikes. The holding, however, still does not dare to fully disclose in public its company structure or owners, as it fears that the negative image still persists. As long as TIM deals with recovering bad debts and pursuing debtors, there will always be opposition against the corporation, TIM representatives said.

The name of the corporation was for a long time considered to be derived from an acronym of the names of the group's three bosses: Tihomir Mitev, Ivo Kamenov and Marin Mitev. They, however, claim that the name is derived from the word team, as they used to be former karate athletes. The truth about the structure of the conglomerate is that 12 people control all of TIM's companies. They all hold a fixed stake in the assets and run separate sectors of the empire. The companies, however, are so many and the relations between them so entangled that it is impossible to make an all-encompassing review of the structure. TIM is like a co-operative, Ivo Kamenov used to say in the past. So it was little wonder that the group bought the Central Cooperative Bank, as the bank's structure corresponded to the group structure.

Marin Mitev and Ivo Kamenov are claimed to be the most influential figures in the management of TIM. Mitev controls the business in Varna and the region, and Kamenov is in charge of the companies operating in Sofia and of the conglomerate's financial activities. Tihomir Mitev was entrusted with the industrial operations of the group. The media assets of the conglomerate, which include TV station M-sat, were handed over to Yordan Yordanov, who has been dealing with programme productions over the last several months. Part of his responsibilities, however, were transferred to Miroslav Nestorov (who is considered the master of the corporation's strategic planning), after two programmes initiated by Yordanov, Better Late than Never and Russian Roulette, turned out to be non-starters on the Bulgarian National Television. Nestorov, who is a navy school and economic school graduate, is in charge of the service sector of the conglomerate, which includes a host of companies within the framework of Mustang Holding.

The grain business is in the jurisdiction of Hristo Chirakov, who used to head the fish business of the company at the helm of Bulfish in the past. Tihomir Vinchev, Ventseslav Evstatiev and Tihomir Atanassov are claimed to be managers of various units of the conglomerate, according to some sources. The remaining top figures in the corporation are not known to the public.

TIM was set up by about 10 people, all of them former marines from the secret elite Varna military unit, Tihina. The usual way up the ladder in TIM consists in serving the group loyally for at least four years before becoming a guard of some of the big bosses. A case in point is the administrator at the Central Co-operative Bank, Tihomir Atanassov, who started his career as Ivo Kamenov's driver and bodyguard. Former karate coach and deputy head of the Varna navy division, Krassimir Nikolov, has become head of one of the two security companies in the conglomerate, MI 2. Karate coach Konstantin Bozhilov serves as the executive director of wholesale trading company TIM Club.

The reforms in Bulgaria in the beginning of the 1990s made most of the marines redundant and they joined the security business in 1992. The former marines were initially employed to collect the bad debt of Bulgaria's Economic Bank. This activity is claimed to have been completely legal and to have been commissioned with contracts signed by the regional directors of the bank, which was state-owned at that time.

The collecting of bad debt remains among TIM's main lines of activity up to now. Both state owned and private institutions used the corporation's help in this field. In countries like Bulgaria, where debtors have always been stronger than creditors, the use of such mediators was often the only possible way to recover unpaid credits.

TIM was registered in December 1993 and set off the development of the Varna-based empire. The company started by providing security to various sites. The company was originally registered by Tihomir Mitev and Marin Mitev. The first contract signed by the former marines was for providing security services to Black Sea resort St Constantine and St Helena. The other big business, which was started at the beginning, was harvesting Rapa whelks in the Black Sea, which was being carried out by TIM Fish. The setting up of this line of business did not pose any difficulties, as many of TIM's employees were former divers at the Tihina military unit. The whelks were initially sold to a Japanese company under a contract signed with the mediation of the Bulgarian Karate Federation. TIM Fish, however, was later pushed out of the whelk business by the competition of Turkish fishing companies, which started purchasing whelks on the Bulgarian Black Sea coast.

TIM entered the grain purchasing business in the mid-1990s by managing to put its hands on the largest grain storage bases and silos belonging to the formerly state-owned grain company Zarneni Hrani. It later acquired the grain storage facilities of prominent Bulgarian grain trader Filcho Kolev. TIM currently controls five flour mills and 20 grain storage bases all over Bulgaria. This figure includes the eight grain storage centres and a flour mill in Dobrich, northeastern Bulgaria, which were acquired by TIM with the purchase of the assets of Bulgarian bankrupt Dobrudzhanska Bank, according to information from the group. TIM's grain storage facilities currently have a capacity of about 1.5 million tonnes, which makes it a major player on the market.

Grain, however, is not the only field of interest for TIM in the agriculture sector. It is claimed that the company's two poultry farms account for 30 pct of the Bulgarian production and exports of goose liver to the EU. The company recently acquired the Gumza (Gamza) winery in Suhindol, northern Bulgaria, by purchasing the assets of the Central Cooperative Bank, and now exports Bulgarian wines. The corporation is said to own 250 ha of vineyards.

The group has occupied positions in other sectors of the food industry lately, for example in edible oil extraction. TIM's companies took over the control of two of the largest edible oil refineries in Bulgaria: Slanchevi Lachi (Sun Rays), in Provadia, northeastern Bulgaria, and Prima M, in Polski Trambesh, northern Bulgaria. The deals were carried out following the same scheme: the corporation bought the debts of the refinery, imposed changes in the management and then carried out a restructuring and stabilisation of the company.

A whole agglomeration of TIM companies operating in the whole spectrum of public services exists in Varna. The holding's participation in the media field includes the M-Sat TV station, which operates on a nationwide scale by cable and is also broadcast by satellite; stakes in two cable TV operators; Alpha Radio, Cherno More (Black Sea) newspaper and the advertising agency servicing these companies. The holding also owns a chain of restaurants, cinemas, video rental shops, a large number of entertainment halls, Internet clubs, bingo halls, etc. The holding's profit in the gambling field alone is estimated at $1.0 mln.

Quarrying of construction materials is among the lucrative enterprises of the sector. TIM controls some of the largest quarries of inert materials. Its trading company Chimimport, on the other hand, has a significant share of the production and trade in fertilisers, petreleum products and chemicals.

The corporation made its first steps in the power sector recently. Thanks to its subsidiary, Bulchimex, it won a tender invited by the National Electricity Transmission Company (NEC) for carrying out electricity exports. The corporation has higher ambitions in this sphere, especially in the trade with natural gas, in cooperation with Luxembourg-registered oil company Petreco S.A.R.L, which has a concession for extracting gas in the Black Sea. The idea behind the co-operation scheme is that Chimimport will have an easy access to cheap natural gas for Bulgaria's fertiliser industry and will thus reduce the production cost of fertilisers.

After the purchase of a 49 pct stake in Bulgarian airline Hemus Air, the corporation made the last step in closing the trade chain, as it will be able to transport cargo by planes. TIM's interests in the field of tourism are not to be ignored. A large scale project, called Alley One, was recently launched in Varna. The project consists in the building of an entirely new town on 100 ha on the Varna's Black Sea coast. A manager of the group, Nikolai Nikolov, whose wife is the chief architect of Varna, played an important role in pushing through the project. The plan envisages the building of seven hotels, 500 eating and entertainment places and 300 shops. The group will build and operate the infrastructure, while the shops and buildings will be rented out to entrepreneurs. Everybody who has $10,000 to spare is welcome, TIM representatives said. About 3,000 people are planned to work at the complex. The real launch of the project, however, was delayed, despite TIM's good relations with the local authorities and the benefits of the project for society. According to some sources, this was caused by opposition in society, while others think that the hindrance was the result of conflicting interests of rival structures. Bulgarian holding MG Corporation and part of the Varna MPs for the ruling Simeon II National Movement are said to be among the opponents of the project.

TIM's connection to U.S. billionaire Mark Rich also sprang many myths. It was said that Rich funnelled millions into the Varna-based empire in order to set up a reliable partner in the grain trade. The fact is that Mark Rich has co-operated with companies within the TIM framework but did not back financially the setting up of the group. The first deals between TIM and Rich, according to the corporation itself, were in the trade with grain. With its numerous grain storage facilities the corporation served as a subcontractor in the wheat export deals carried out by Swiss metals trading company Glencore, which is owned by Mark Rich. The contact with Rich was established through Nikola Damyanov, a long-serving director of Chimimport. Damyanov was considered the closest person to former Trade Minister, Hristo Hristov, during the authoritarian rule of Bulgarian communist leader Todor Zhivkov. Damyanov, who has Canadian citizenship but lives in London, is claimed to occupy high posts in the empire of Mark Rich. The first of TIM's large-scale deals in which the U.S. billionaire took part was the acquisition of Chimimport at the end of 2000. The deal was carried out with the mediation of Virgin Islands registered company Fertitron Inc, which was owned by Rich. Fertitron bought the debt of the chemicals trading company owed to Bulgaria's First Investment Bank. Fertitron Inc was later acquired by TIM.

TIM's acquisition of the Central Cooperative Bank (CCB) is by far the largest deal of the Varna group. Several companies of the group initially managed to buy the stake of the Gumza winery and several minority stakes in the bank. Later on, Chimimport acquired the state-owned stake in the bank and thus TIM's direct participation in the bank grew to about 60 pct. The TIM controlled stake in the bank reaches 84 pct if the shares owned by the TIM-controlled Central Cooperative Union are added up.

The change of ownership at the bank was followed by a reshuffle of the bank management and a re-positioning of the bank on the market, which brought financial stability and improved financial performance. This allowed the bank to become active on the Bulgarian debt market. In a short while the bank managed to acquire the assets of three bankrupt banks: Dobrudzhanska Bank, Credit Bank and Agricultural Credit Bank. The next aim is the purchase of bankrupt Slaviani Bank, for which a preliminary contract has already been signed. TIM bosses are not concealing their interest towards another three closed down Bulgarian banks: Balkan Universal Bank, Capital Bank and Kristalbank.

After managing to acquire a bank, TIM expanded its presence in the financial sector by purchasing specialised financial service companies. After an unsuccessful attempt to acquire Bulgarian insurer Jupiter, the corporation acquired a majority stake in another active insurer, Armeets.

At the end of 2002, Chimimport bought a majority stake in Bulgarian pension insurance company Newton Sila by acquiring 98 pct in Newton Sila owner, Newton Financial Management BG, for 3.0 mln euro. The insurer will be renamed Sila, a general shareholders' meeting decided in the middle of January 2003.

TIM's plans for the next several months include acquiring a life insurance company, a health insurance fund and a leasing company. These three institutions will round off nicely the set of financial services, which the corporation offers.

A restructuring procedure has started in the financial companies of the group. The newly bought Newton Financial Management BG will be renamed CCB Group Assets Management EAD. Its capital will be raised through a contribution of the stakes held by the group in the Central Cooperative Bank, Armeets and Sila, as well as through contributions of any future acquisitions. The aim of the financial holding is to manage assets of more than 500 mln levs by 2005, the corporation's strategy says. CCB currently has 170 offices around the country, and Armeets has a further 35. The idea for the future consists in setting up one-stop-shop sales of bank, insurance, pension and health insurance services.

These steps of the corporation hint at a strategy aimed at bringing new people to the fore, who will be hired to run the TIM subsidiaries under management contracts. They will be in charge of opening up the corporation to the state institutions and creating a positive image of its business activities. If the current rate of expansion is retained, the real owners will be forced to seek legitimacy. The expansion of their business would simply be impossible after a certain moment in the future if relations of a new type are not established with the state institutions. The history of the Bulgarian transition abounds with similar examples of such structures with contradictory fame which managed to achieve legitimacy and the status of representatives of Bulgaria's "national capital" with a little bit of PR and under long-term social pressure.

($=1.825 Bulgarian levs)

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