Sazka circus to truly begin when Vítek files for insolvency

Martin Ulčák says he may ally with coal baron František Štěpánek and industrialist Jan Světlík to save the troubled betting firm

Aleše Hušáka a pozoruhodné množství českých finančníků čekají napínavé měsíce. Boj o Sazku se hned tak nerozhodne. | na serveru Lidovky.cz | aktuální zprávy foto: © ČTKČeská pozice
Aleše Hušáka a pozoruhodné množství českých finančníků čekají napínavé měsíce. Boj o Sazku se hned tak nerozhodne. | na serveru Lidovky.cz | aktuální zprávy

Not even the controversial Czech mega eco-tender has tempted as many financial heavyweights as has the fight for control of the troubled betting and lottery company Sazka.

While it is just a few giants such as Petr Kellner, Richard Háva and Martin Roman fighting over the eco-tender, the battle field for Sazka has been joined by a multitude of billionaires. Here they are in alphabetical order: Marek Dospiva from Penta; the oil magnate Karel Komárek Jr.; the industrialist Jan Světlík; the coal baron František Štěpánek from Sokolov; the banker Patrik Tkáč from J&T (who apparently has a certain agreement with PPF); Martin Ulčák; Ivo Valenta from Synot (Sazka’s rival); and the developer Radovan Vítek.

For those not in the know it is necessary to explain that Vítek is a loner, officially Penta is also in it alone (if a deal hasn’t been arranged with Vítek from the start), Synot is with Komárek and Ulčák is with Štěpánek and last but not least Světlík is with Aleš Hušák.

The Hušák–Ulčák–Štěpánek–Světlík confederation deserves a special mention; Ulčák, who together with Hušák is trying to save Sazka from a hostile take over, has two indubitably solvent financial partners. The coal baron František Štěpánek, the boss of Sokolovská uhelná, and the industrialist Jan Světlík. “They are both traditional allies of mine and I’m in daily contact with them. If needs be they’ll help, but this hasn’t been broached yet,” Ulčák told Czech Position. What are these titans after? Sazka isn’t a state cash cow that can be permanently milked in myriad ways.

So what are these titans after? Sazka isn’t a state cash cow that can be permanently milked in various sophisticated ways. But if we look at the majority of those who control Sazka on paper (mainly bosses of the sporting associations and regional sports bigwigs) , then we can’t keep the illusion that they will be able to withstand the marauders’ intellectual and financial superiority.

If we look at the battle for Sazka through the prism of recent events, it is clear that for some of the raiders it’s not about the future of sport but merely squeezing the betting and lottery company. In comparison, everything that Hušák has so far shown with Sazka will look like a frank attempt by a megalomaniacal zealot to boost the company — and himself — at any price. From the standpoint of liquidity, Sazka has hit rock bottom and next week its creditor, Radovan Vítek, will definitely file for insolvency proceedings, a new chapter in the firm’s history will be opened. The next 60 days will depend on how the judge will act.

Vítek the Cypriot vagrant

Everything that is currently going on around Sazka is neither important nor interesting. At the moment it doesn’t matter what Hušák states, what one billionaire says to another, what lawyers, the officials of sporting associations or politicians expound. The slaughter begins this week when the main butcher, Radovan Vítek — as he has promised — will file for insolvency at the courts.

Sazka boss Hušák has already warned Vítek that the firm isn’t bankrupt and that whoever attempts to plunge it into insolvency can expect a legal battle. “We will fight back against any bullying petitions. In the event of this petition the Cypriot vagrant must be aware of what he is doing,” Hušák said at a Jan. 14 press conference. He was speaking to Vítek, whose companies are based in Cyprus. Sazka’s lawyers can appeal against the court’s decision, so a relatively long process is expected.

Hušák and Ulčák, meanwhile, will try and convince Sazka’s shareholders (but chiefly the gambling public) that a petition for insolvency doesn’t automatically mean that the firm is bankrupt. If Vítek is counting on the associations handing him the symbolic keys to Sazka as soon as he submits the petition and then thanking him, he is mistaken. Moreover, Sazka’s lawyers can appeal against the court’s decision, so a relatively long process is expected.

Without doubt, it will be accompanied by some juicy background information, which is already spreading in Prague’s financial wings. It has been said for some time that there is hardly any judge in Prague with whom Vítek cannot come to an arrangement.  There is also speculation that for Vítek, an old hand in many bankruptcies, it will be no problem to install an insolvency administrator who will go hand in hand with him.

Vítek is interested in several of Sazka’s real estate projects (land and viticulture); apparently he doesn’t want the arena or the main office. Purportedly he acts in agreement with Penta but is inscrutable. He sometimes behaves as though he couldn’t care less, muddying the waters and raising tension. And he enjoys it! Some unbelievable tales are circulating in Prague. For instance, his way of communicating with Hušák. Apparently, when Vítek tried to call him, the head of Sazka didn’t pick up the phone. Now the opposite is true: Hušák calls Vítek three times a day, and on the third try Vítek pickus up and says, “Not now, in half an hour” and hangs up. He’s simply having fun.

In any event, the main battle of nerves will start with the petition for insolvency. The first to crack loses. Ulčák described the situation to Czech Position: “We’re a third of the way there. It started in December and we could have it on track by the end of March.” Theoretically, it could work out for Hušák and Ulčák — to get the money together that is so acutely needed for paying the debts that Radovan Vítek holds. The boss of Sazka might not have the money, but if Ulčák — as he told Czech Position — manages to find the necessary billions, thanks to his long-term partners Štěpánek and Světlík, Sazka could hold its head above water. Except that Štěpánek and Světlík have yet to give him even Kč 1 billion.

The vet from Prague 6

Hypothetically, it could happen that while the vultures circle over the stricken animal, with a peck at an eye here, and a peck at an ear there, an experienced vet from Prague 6 (the seat of Kellner’s PFF Group and where the Czech billionaire himself lives) appears out of nowhere and says, “I can cure the ailment, and what’s more I have an offer you can’t refuse.” He throws in half a billion or perhaps a billion more than the competition. While the others throw mud at one another in the media in a hostile takeover bid, “Kelly” will be seen as a munificent protector of the firm and Czech sport. Even if, in the end, there is no profit, it may pay off for him. Because of his ego (he steals the show) and the renown. Kellner certainly has the deep pockets for it — so what if one of his many projects comes to zilch? Kellner certainly has the deep pockets to overpay for Sazka — so what if one of his many projects comes to zilch?

In essence, everybody who wants to run Sazka is waiting for Vítek’s “insolvency step.” The report on petitioning for insolvency alone terrifies the holders of Sazka’s bonds, and the longer the proceedings last the greater the chance that foreign bondholders will want to get rid of their bonds at any price. So, for instance, anyone who gets their bonds with a 50 percent discount will be closer to controlling Sazka. However, apart from biting their nails, whatever the bondholders do is irrelevant right now. Paradoxically Sazka didn’t get here on bonds, Vítek is filleting it on unpaid bank loans.

The debentures that Sazka issued more than four years ago for financing the O2 Arena (formerly Sazka Arena), originally at €215 million euros, represent the company’s greatest credit burden. They are payable to the end of 2021 and just €13 million had been paid by the end of 2010. In addition, last week the international rating agency Standard & Poor’s lowered Sazka’s long-term credit rating to the lowest level, D, from CC, which means that the company is not able to pay any of its debts.

The Luxembourg Stock Exchange even halted trading with Sazka’s bonds — standard practice when a firm has no money, and aimed at preventing hysteria from accelerating the decline. It’s also envoked when a company doesn’t meet reporting obligations.

Politicians awaken

Government politicians are evidently following the melee with dismay; their attempt to use press conferences (on reforms to the pensions system, the armed forces, the health and social security system) to divert attention from the affair with now former Environment Minister Pavel Drobil and Martin Barták’s corruption scandal, have been well and truly knocked on the head by the Sazka battle. So they are starting to have their say about it.

Let’s have a look at what Finance Minister Miroslav Kalousek (TOP 09), the strongest man in the government, has to say about Sazka. It is not irrelevant, gambling regulation falls under his ministry as does the financial-analytical section that in a certain phase of the fight over the lottery company can play a considerable role (of course if Kalousek so wishes). “The state does not intend to intervene in the negotiations on the future of Sazka, nor will it help the sporting associations in this complicated financial situation,” Kalousek told daily Lidové noviny.

“The state will never forgo support for sports for the young. But it will not compensate the main shareholders, especially the Czech Sports Associations (ČSTV), for the mistakes in their decision-making. If the management of ČSTV, thanks to its own incompetence, decided to give up its income from Sazka, which it used to pay its regional functionaries, and now thinks that the state will pay them, well I say ‘no,’” Kalousek added.

Prime Minister Petr Nečas (Civic Democrats, ODS), took a softer tone. “I am following the matter by all the means that are available to me as the head of government,” he told daily Hospodářské noviny. Evidently, he was thinking of the relevant reports from the secret services. “From the standpoint of protecting the economic interests of the Czech Republic, it is a matter that cannot be left aside,” he added.

Education Minister Josef Dobeš (Public Affairs, VV) also commented on Sazka. He would like to see Hušák and the management of ČSTV replaced. “Personally I have nothing against the chairman, but I don’t think that old people in their positions can come up with a new solution that could save sport,” he declared. In his opinion, ČSTV also needs “a new, active management.”

To be continued in court today (Jan. 17) at 10:00 a.m. ...