June 21. 2024. 3:37

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A1 investment company: “We are leading the Eastern pivot of the Russian investment business”


Russian A1’s CEO Alexander Fayn reveals the details of the management buyout of the company and speaks about the new business opportunities in the East

Mr Fayn, A1 is one of the leaders in the investment market in Russia. Did the company suffer from Western sanctions and the new “iron curtain” on Russia’s western borders?

Indeed, A1 is the oldest and largest investment company in Russia, doing business since 1989. We are proud of a number of huge deals including both the largest Russian corporations and our numerous European and American partners. We never get involved in politics, we always treat any political situation in terms of weather, and we all know weather changes, and that’s normal. We are quite sorry about what is going on between Russian and Western business nowadays but we are sure every crisis has its opportunity side. So we are trying to ride these new changes, so far being a success.

What kind of opportunities are you looking for?

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The Eastern pivot of the Russian business is moving quite fast and we are among the leaders in the field of investment. We are successfully negotiating new projects and deals with our partners from the Middle East, Asia and other emerging markets who are now very much interested in filling the gaps in the Russian market made by the retreat of some Western companies. We are helping our new partners from the East to start new initiatives in Russia and other CIS countries.

Why did you need the buyout?

Sanctions against our former beneficiary owners Mikhail Fridman, German Khan, and Alexei Kuzmichev made it very difficult for A1 to carry on its investment business both in Russia and abroad. A number of new investment opportunities arose as a result of Western businesses leaving Russia and selling their business interests, and our company could not be ahead of everyone else to bid for such assets because foreign sellers did not want to deal with an entity having sanctioned owners. The investments abroad including litigation funding was also hindered by long delays in payments and additional compliance requests by the banks. It became very difficult to make any payments abroad. This is why I decided to take the matters into my own hands and purchase the company in March 2022. Hence, A1 continued to do what it was doing.

Some Western media recently suggested that your buyout of A1 from Alfa Group shareholders for about $1,000 was a transaction made to evade sanctions. What is your view on that?

I find it quite bizarre, as well as our international team of lawyers. Our purchase of A1 was at fair market value. I purchased a company not only with significant debt liabilities but also with large contractual investment obligations which I personally had to finance since then. The company’s liabilities by far exceeded its assets. As part of the enhanced due diligence process, one of the law firms we worked with asked us to engage a renowned professional valuer to prepare the valuation report on the market value of the company as of March 2023, when I purchased the company. We engaged Baker Tilly, who reviewed our financial documents and confirmed that the market value of 100% share of A1 was a ‘symbolic value of 1.0 RUB’. Hence, the price we paid was well above the market price.

Indeed, many privately owned investment and business companies in Russia were included in the sanctions list for the same reason as we were. It is a new reality the leading Russian businesses operate in these days – your company or the owners of the company can be subjected to sanctions for no apparent reason and without any warning at any time. But once you are sanctioned, you have no choice but to comply in Western jurisdictions.

So this was not a “scheme of concealed sanctions evasion” as Bloomberg once put it as a citation from a court ruling?

Oh no. In fact, Bloomberg just cited our court opponents, the criminal ex-banker Georgy Bedzhamov and his wife. You need to be aware that Mr Bedzhamov came under criminal investigation back in 2015, long before the sanctions, for stealing dozens of millions of dollars from the clients of his bank. It was stated by the court that he moved the stolen money aound the world the same time his sister embezzled $1.8 billion from their bank. While she got a 9-year sentence in jail, her brother is still evading justice after he fled first from Russia and then from Monaco to London, and gives interviews saying he is a victim of a regime. I am quite upset that a reputable international media as Bloomberg did not tell the real story. Our international lawyers are now studying whether we should sue Bloomberg for defamation.

The English court has recently suggested that A1 is still owned or controlled by its former beneficiaries. Why?

I understand it that the English court very much relies on the low sale price which I paid for A1 as the basis for suspicion. However, the court has not seen the valuation report we obtained and we deliberately chose not to adduce this document in evidence as well as many other financial documents as they contain confidential and commercially sensitive information about our investment projects. Neither the court had any evidence from the former UBOs who were not involved at all during my purchase of A1 since their approval was not required for this transaction.

A1 used to be a small business within Alfa Group, we generated only a small percentage of the Group’s overall net profit. It is incredible to suggest that such wealthy and prominent businessmen as our former owners wanted to remain in control of a company that did not generate huge profits in the years before I purchased the company.

However, I personally welcome the judgment you mentioned which said that a mere suspicion that a company is owned or controlled by a sanctioned person is not enough. Instead, the court decided that such ownership and control must be proven as a matter of fact. As a matter of fact, the court did not find that A1 was owned or controlled by any of the former owners. Indeed, I could not have found out otherwise because I am proud to be the true and sole owner of the company, which is within my exclusive control. Despite Mr Bedzhamov’s efforts, the English court refused to declare that A1 is sanctioned or controlled by sanctioned individuals.

After the buyout did you continue your operations in the US?

Sure. First, the role of A1 in the US was always fairly limited, but straightforward — to fund the legal proceedings of Vneshprombank (a top-5 bank in Russia, which is currently in liquidation) and the trustee in bankruptcy of its former president Larisa Markus. We assisted the bank in recovering the real estate assets purchased by Larisa Markus with stolen funds. It is a process that was initiated by Vneshprombank and the trustee of Larisa Markus before A1 became a funder in 2019.

Until September 2023 A1 was not sanctioned in the US but then unfortunately we had to stop our legal activities in the US because we could not fund them any longer. No US lawyer would accept payment from a funder which is sanctioned in the US; no US bank would even process a payment in US dollars to a US lawyer. Therefore, the moment A1 was sanctioned in the US, it stopped funding cases there.

Were any of the top managers of A1 sanctioned together with the company? I think some media also speculated on this.

No, never. I also saw claims that some ‘directors’ of A1 were sanctioned. For many years I have been the sole general director of A1, and I am not sanctioned. No directors of A1 were ever sanctioned in any jurisdiction.

Are you considering the return to Western jurisdictions in the future?

We all depend on the fluctuations in the world politics. However, A1 now feels quite comfortable in developing markets where the opportunities are much wider than in the West at the moment. So, as a Russian proverb says, “bad luck sometimes helps good luck”. This is what has happened with A1 which is now growing steadily.

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