SHARE CAPITAL INCREASE OR HIDDEN PROFIT DISTRIBUTION? Comvex - a "family business" for Dan Drăgoi

• According to some information and documents obtained by BURSA, Dan Drăgoi and Viorel Panait have concealed the takeover of Comvex behind a share capital increase

• Over 4 million of the new subscribed shares have been acquired in 2016 by the wives of the two men

• The deal was conducted to the detriment of several companies, including Swiss company Davira

• On November 11 2020, a new court hearing will be held in the Constanţa County court on the issue of the share capital increase at Comvex

Investments in the Constanţa port represent a necessity for us, but the manner in which some of them are performed raise numerous question marks which the institutions of the state don't seem to be willing to elucidate.

That is also the case of the new Grains Terminal of Pier 80 of the Port of Constanţa, inaugurated one month ago (September 17, 2020), in the presence of prime-minister Ludovic Orban, by the beneficiary of the investment - Comvex.

The investment in question is a beneficial one, but the way it was used by certain people in the management of Comvex as a pretext for seizing the company to the detriment of almost 8000 shareholder is shady.

• How some shareholders get bigger and others get smaller

In 2016, a capital increase took place at Comvex, an increase officially motivated by the company's management's desire to build a grain terminal, given that the basic activity on ferrous and non-ferrous ores and waste suffered a decline following the contraction of the activity of Romanian steel plants in our country and of the business volume of Sidex Galati.

Although the largest grain terminal in our country was recently inaugurated, the row of the capital increase decided in 2016 for Comvex seems far from over, given that there are several related court cases pending in the courts, and one of the causes has a first hearing set for November 11, 2020.

Why? Because in the case, through a dilution orchestrated by Dan Drăgoi, several companies saw their stakes in Comvex significantly reduced, in favor of the wife of Drăgoi, Anca Drăgoi and Ruxandra Nicola - the wife of the business partner of Drăgoi, Viorel Panait, former member of the Board of Directors of Compania Naţională Administraţia Porturilor Maritime Constanţa (National Company for the Administration of Sea Harbors Constanţa).

Some of the companies that ended up with a loss include Swiss company Davira which saw its stake in the capital of Comvex reduced.

The history of the events goes as follows:

-On July 8th, 2016, the Extraordinary General Shareholder Meeting of the Shareholders of Comvex approved decision no. 249 on the development of a "Grain terminal with a capacity of 200,000 tons in the depth pier no. 80 of the Port of Constanţa", with a total amount of 52 million Euros plus VAT. On the same day, through the decisions no. 256 and 257, the Extraordinary General Shareholder Meeting of Comvex allocates 24,000,000 lei (5.2 million Euros at the exchange rate of the day) out of the company's profits to its own funding sources for the development of the Grain Terminal.

Out of that amount, 3.3 million Euros represented the contribution of 10% for the project which would be financed through the state aid approved through Government Decision 807/2014 - for the implementation of state aid schemes intended to stimulate investments with a major impact in the economy, a normative act amended through Government Decision 357/May 17th, 2016.

- On August 4, 2016, Comvex submitted to the Ministry of Finance the request for state aid, for an investment estimated at 33 million euros, of which 10% - i.e. 3.3 million euros - were put up by the company and 10 million euros by the state, with the rest to be borrowed to be borrowed from banks. The project would require an additional 19 million euros for equipment and machinery, as well as for carrying out works necessary for the realization of the investment project.

-The selection for the projects that were to receive state aid, held in the session July 11, 2016 - August 22, 2016, ended with a failure for the Comvex, which, with just 58.21 points, ranked only 17th out of 36 projects submitted and was not selected for funding. In 2016, only five projects were selected by the companies Pirelli Tires Romania, Arctic SA, Clariant Products Ro SRL, Robert Bosch SRL, Safe Med International SRL and Alu Menzinken SRL, the last of them having 94.96 points.

• Panait selling, his wife buying

Before finding out that their project will not be selected for state aid (on August 9, 2016, five days after submitting the documentation to the Ministry of Finance), Dan Drăgoi buys 40 shares from Comvex.

In the meeting of the Board of Directors of August 17, 2016, attended by 3 of the 5 administrators - Viorel Panait, Dan Drăgoi and Idu Corneliu Bogdan, the summoning of the Extraordinary General Shareholder Meeting convened for the capital increase, intended to raise funds for the construction of the Grain Terminal, was approved. The capital would be increased by an additional 15 million lei (3.3 million euros) compared to the July meeting.

In order to get support for banks and to get to the 20% co-financing percentage they requested, Comvex amends the general cost of the investment from 52 million Euros to 42 million Euros.

Subsequently, on August 29, 2016, the Ministry of Finance published the list of companies that had been deemed eligible for state aid, which did not include Comvex.

Following this decision, on September 20, 2016, the Extraordinary General Shareholder Meeting approved the share capital increase, the period for the conducting of the IPO and its content and terms (decision no. 262).

Subsequently, on August 29, 2016, the Ministry of Finance published the list of companies that qualified for state aid, Comvex not being selected among them.

Following this decision, on September 20, 2016, the EGMS approves the capital increase, the offer period, the content and the conditions of the public offer. (decision no. 262).

A few days before the approval of the capital increase, Dan Drăgoi and Viorel Panait resorted to a maneuver meant to guarantee they would be able to participate in the subscription of the future shares. Thus, on September 16, 2016, Ruxandra Nicola, Viorel Panait's wife bought 40 Comvex shares at 20.5 lei per share, and on September 19, 2016 Anca Drăgoi bought the same number of shares at the price of 20.4 lei per share. Thus the two thus became individual shareholders of the company.

As it appears from the transactions carried out with Comvex shares through the Bucharest Stock Exchange, 33 of Ruxandra Nicola's 40 shares come from her husband Viorel Panait, one of the five directors of Comvex.

It bears mentioning that trades in question were intermediated by Raiffeisen Capital&Investment, part of the Raiffeisen Group. Raiffeisen Bank is one of the two banks of the consortium which financed the investment in the Grain Terminal of the Port of Constanţa, together with Exim Bank.

• 4.1 million shares from the Drăgoi-Panait faction, for their spouses

The maneuver of the Drăgoi-Panait pair was a preamble of what was going to happen in the second stage of the subscription for the share capital increase.

While in the first stage of subscription, immediately after the decision of the General Shareholder Meeting of September 20, 2016, the subscription of the shares was intermediated by Raiffeisen Capital&Investment in five locations across Romania (Bucharest, Constanţa, Cluj, Iaşi and Timişoara), the second subscription stage was held only at its headquarters of Bucharest.

At the second stage, the subscription price was 2.51 lei, which would have allowed many of the almost 8000 shareholders of Comvex to participate in the subscription and to increase the capital fund, but Drăgoi and Panait did not want that to happen.

In the second stage of the offering, the subscriptions were done "in the family": both directors - Dan Drăgoi and Viorel Panait and their wives who also subscribed 17.5% of the share capital each.

The second subscription period lasted three calendar days, of which only one was a working day, i.e. the first day was Friday, December 16, 2016.

At the offer from the second stage, the subscriptions were made in the family: both administrators - Dan Drăgoi and Viorel Panait and the wives who also subscribed with 17.5% of the capital.

We mention that Viorel Panait signed and sent to the BSE the Comvex report regarding the closing of the first subscription stage only on Thursday, December 15, 2016, at 1 p.m.

• NOTE

It follows that the persons interested in the second stage, which actually lasted only one day (December 16), would have had only 20 hours to find out the number of shares that were unsubscribed and available - 4,155,316 (representing 35.6497 % of the share capital), of which almost 4 hours would have been necessary for the preparation of the documents / financial support / logistics necessary for the second stage subscription. Especially since the allocation of shares was done to a limited number of people, in the order the subscriptions were received in, although the line at the Raiffeisen Capital & Investment agency in Bucharest was formed at midnight.

That is why, out of the remaining 4,155,316 shares, 4.1 million were subscribed by the wives of administrators Panait and Drăgoi, and the rest of the shareholders were left with only 55,316 shares from the capital increase made, an increase that was registered following the Board decision of December 21st, 2016.

• Swiss losses, presented in a more "pleasant" manner by PwC, with 5.5 million francs

Following the share increase, the stake of Solidmet SRL in the share capital of Comvex dropped from 63.24% to 30.68% - 3,576,953 shares, and the other shareholders reached 8,079,018 shares - 69.31%.

Solidmet is 100% owned by Bulk Project SRL, where Dan Drăgoi is a manager. Bulk Project is 45% owned by Befstras Holding Limited Cyprus and 55% by Octogon Shipping&Services SRL (which has as its sole shareholder Corneliu Bogdan Itu). Befstras Holding is 100% owned by Davira Ltd Zurich (where Dan Drăgoi, Viorel Panait and Raimondo de Rubeis hold 33% each). Octogon Shipping&Services SRL is 99% owned by Boraz Holding Ltd Zurich and 0.1% by Corneliu Idu.

Through their action, Drăgoi and Panait have caused a loss of 5,850,000 francs to Davira, an amount out of which the company was supposed to pay taxes to the Swiss tax administration.

According to the documents of the Swiss company, led by a professional executive, who is independent from the shareholders, Davira lost half the shares it had in Comvex, following Drăgoi and Panait's maneuver.

Through an address sent on December 14, 2017, law firm Buhlman Koenig&Partner of Switzerland shows that, according to Swiss Federal Tax Administration, the rights subscribed by close relatives (the wives of Drăgoi and Panait) represent a concealed distribution of the profit recorded by Comvex, to the detriment of Swiss company Davira. Under these circumstances, the lawyers in Switzerland and the representatives of Davira claimed that the amount of 5.8 million Swiss francs would be treated by the country's tax administration as dividend and therefore taxed. According to the applied taxation method, Davira would have been expected to pay 3.15 million Swiss francs in taxes.

What is curious is that following this address, on December 22nd, 2017, following a meeting that Viorel Panait and the representative of Price Waterhouse Coopers had in Switzerland with the representatives of Davira, a memorandum was signed by which the three parties established that the damage suffered by the Swiss firm is reduced from 5.8 million Swiss francs to 211,000 Swiss francs, a reduction which in the opinion of the lawyers in that country has no justification.

It is curious that following this address, on December 22, 2017, following a meeting that Viorel Panait and the representative of Price Waterhouse Coopers had in Switzerland with the representatives of Davira, a memorandum was signed by which the three parties established that the damage suffered by the Swiss firm is reduced from 5.8 million Swiss francs to 211,000 Swiss francs, a reduction which in the opinion of the lawyers in that country has no basis.

Viorel Panait met with Davira's executives in Zurich on December 21st, and on December 22nd, the Swiss company's directors said PwC will make an assessment of the dilution of Comvex's stake, with Panait set to ensure the liquidity of the company in question.

At the same time, Comvex shareholders were convened, on January 25, 2018, to appoint Price Waterhouse Coopers Audit SRL as financial auditor of the company for the next three years. So the company that solved the situation in Davira and reduced the initial loss from 5.8 million Swiss francs to 211,000 Swiss francs was hired as an auditor at Comvex.

It remains to be seen whether, on the hearing of November 11, 2020, these facts will attract or not the attention of the Court of Constanţa, which is hearing a lawsuit against the share capital increase at Comvex, brought in the autumn of 2016.