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Investment group LetterOne is sitting on about $300mn in unpaid dividends after western sanctions prevented it from making payouts to its Russian-oligarch backers Mikhail Fridman and Petr Aven.
Luxembourg-based LetterOne, whose assets include retailer Holland & Barrett and mobile phone operator Turkcell, has signed off on two bumper distributions since 2022.
But it has not been able to pay large chunks of the money because Fridman and Aven, two of its co-founders, were hit by sanctions after Russia invaded Ukraine, making them ineligible to receive payments.
The amount due is made up of a $200mn dividend approved at the company’s annual meeting in February last year and a portion of an earlier $172mn payout approved in 2022. It is recorded in accounts filed by the company last month as being owed to creditors.
The unpaid dividends were declared during a turbulent period for LetterOne, whose management and operations endured upheaval after sanctions were imposed on Fridman and Aven, despite the company itself not being sanctioned.
Disclosure of the sum also comes as sanctions against Fridman and Aven are being hotly contested. The EU’s general court partially annulled them last year after ruling that the bloc had not presented enough evidence to show that the two men were involved in efforts to undermine Ukraine.
But the sanctions remain in place because the EU has deemed Aven and Fridman to be “leading business persons [ . . .] involved in an economic sector providing a substantial source of revenue” to the Kremlin. Fridman and Aven have separately challenged that justification.
Earlier this year, the FT reported that Hungary had threatened to block the EU’s renewal of sanctions imposed on about 2,000 Russians unless Fridman was removed from the list.
The delayed payouts relate to LetterOne’s performance in 2021, according to company filings and people familiar with the matter, a period before sanctions were imposed against Fridman and Aven, who resigned from the company’s board in 2022. The dividends were approved at company meetings held after Fridman and Aven were sanctioned.
The accounts showed that $68mn of the $172mn distribution approved in 2022 was “made before the date on which EU and UK sanctions were imposed”, meaning about $104mn is still outstanding.
LetterOne told the Financial Times: “The dividends declared relate to L1’s performance in the 2021 financial year, before the start of Russia’s illegal invasion of Ukraine. L1 is required by law to set aside and freeze the portion of these dividends due to sanctioned individuals.”
A person close to the company said that because of the circumstances facing the business, the annual general meeting to approve LetterOne’s results and financial statements was not held until February 2024, meaning it had been unable to reflect the most recent dividend distribution in its accounts for earlier years.
Fridman and Aven set up LetterOne in 2013 with business partners German Khan and Alexei Kuzmichev after selling their stakes in oil major TNK-BP to Russia’s state-run Rosneft.
The four have long had a partnership through holding stakes in Russia’s largest private lender Alfa-Bank but have in recent years sold out of the bank as they attempt to overturn EU sanctions against them.
LetterOne, which has an office in Mayfair, changed its governance structure after Fridman and Aven were targeted by UK sanctions in 2022. It froze their shareholdings and the two oligarchs no longer have operational involvement in the business.
Khan and Kuzmichev sold their stakes in LetterOne and Alfa-Bank to Russian billionaire Andrei Kosogov, a longtime business partner who is not under sanctions, shortly after being placed under sanctions in 2022.
Fridman and Aven retained their LetterOne stakes even as they also sold their Alfa-Bank shares to Kosogov earlier this year. They still own just under 50 per cent between them, while Kosogov holds about 47 per cent.
Kosogov decided not to receive a payout in LetterOne’s most recent round of dividends, and sums due to him have also been included in the balance owed to shareholders including Aven and Fridman.
“LetterOne is prohibited by law from paying — and does not pay — dividends to sanctioned individuals or provide any other benefit to them,” the company said. It added that no dividends had been declared in the financial years from 2022 to 2024.
Fridman and Aven did not respond to requests for comment.
