Chichvarkin Says Liquidity Woes Forced Sale

Yevroset chairman Yevgeny Chichvarkin looked alarmed and exhausted as he lay sprawled on a sofa in his company's negotiations suite. Just days before, he had sold the country's leading mobile retailer for what he called "kopeks."

"Yevroset fell prey to the financial crisis," Chichvarkin said in an interview Tuesday.

"I've been sleeping for three hours a day over the last couple of weeks," he added, yawning.

Yevroset was bought by billionaire Alexander Mamut last week in a deal that reportedly involved Mamut paying $400 million in cash and assuming $850 million in debt. On Tuesday, VimpelCom said it had applied to buy a stake in Yevroset.

Chichvarkin said negotiations with Mamut lasted 28 hours before the deal was announced on Sept. 22, just four days after President Dmitry Medvedev announced a multibillion-dollar package to inject liquidity into the banking sector.

"We weren't going to sell, but two weeks ago -- exactly on Friday, Sept. 19, at the investment forum in Sochi -- we understood that either we would sell the company or we would face a significant risk," Chichvarkin said.

"We understood that we might not be able to refinance our loans," Chichvarkin said with a sigh. "The government hadn't acted quickly enough to provide enough liquidity. We applied to 20 major banks and got no result. They simply didn't have enough money to lend to us."

Chichvarkin acknowledged that Yevroset had chosen a risky strategy aimed at quick development rather than hedging its risks.

"No one expected it would be that hard," he said, smiling bitterly as he pointed a cup with the words "Welcome to the new [expletive] 1998."

"It was a present at our New Year's party because this year is the 10th anniversary of the default," Chichvarkin said. "We turned out to be right to some extent."

After experiencing his own financial troubles, Chichvarkin said he had some recommendations for the government to get out of the crisis.

"Tax reform is needed," he said. "So if, for instance, value-added tax were cut to 12 percent, some investors would certainly come back to the market because it would demonstrate the state cares and that Russia still wants to be an island of stability."

He also said he would cancel "import barriers on food, especially meat."

Although his proposals seemed more aimed at helping corporate profits than the wider economy, Chichvarkin said he felt the government's pain.

"Rising budget spending worries many investors, because money is leaving the economy. It makes the economy uncompetitive," Chichvarkin said.

Asked about his future plans, Chichvarkin, 34, said he did not see himself anywhere except at Yevroset.

"It's like having your daughter married to a maharajah," he said. "You certainly move with her to the prince's palace, to look out for her after she's married, right?"

Chichvarkin said that after the sale of Yevroset, he has been left without a company or a fortune to his name.

"There's nothing to diversify or hedge," he said, shrugging. "I will simply continue doing what I've been doing for the past 10 years -- selling mobile phones."