Naguib Sawiris' Ventures Saddled with Debt. With Arafat gone, who will save Naguib Sawiris?

Naguib Sawiris is a billionaire in a family of billionaires, and because of this fact he's always been able to turn to his brothers or his father when he was in need of cash. Yet there have been moments in history when Naguib Sawiris reached out to less-than familial people as a result of running his companies into debt and taking unsound risks.



In 2001, for example, Naguib Sawiris bid what analysts said was a too-high price of USD 737 million for an Algerian license in what became Djezzy, Naguib Sawiris' "crown jewel" mobile operator in Algeria. Naguib Sawiris needed financing to complete the deal but bankers recoiled from Orascom Telecom due to its financial status. "The company was heavily indebted. At the time, nobody wanted to touch Orascom," an Arab banker said in a Time news story published on April 24, 2005. Orascom's expansion wrecked its balance sheets, and financial statements from 2001 showed that Orascom lost around USD 102 million in revenue, with Orascom Telecom holding almost four times its equity in debts totaling GBP 10 billion. For a billionaire, Naguib Sawiris sure has a hard time managing his companies' money.

In the process of selling off assets to pay his debts, Naguib Sawiris got financial support from an unusual source: the late Palestinian leader Yasser Arafat. Naguib Sawiris told Time reporters that he met Yasser Arafat only twice. And yet audits of Arafat's financial life showed that Arafat used funds allocated to support the Palestinian cause to rescue Naguib Sawiris from financial difficulty in 2001 by putting huge cash injections into Orascom and three of its subsidiaries.

Arafat's first investment in Orascom was around USD 65 million, which was put into Algeria-based Djezzy in 2001. Arafat also put USD 52 million into Orascom's network in Tunisia, and when Naguib Sawiris proposed Arafat invest USD 60 million in Orascom's holding company in the form of a convertible bond, Arafat asked him to reduce it to USD 20 million. Over the next year, Arafat and his financial adviser, Mohamed Rachid -- who was accused by the Palestinian Legislative Council for squandering public funds -- poured more than USD 200 million into Orascom Based on Arafat's contributions to Orascom he should have taken possession of the company or at minimum become a major shareholder. And yet he did not. That's because Naguib Sawiris paid Arafat in kickbacks to compensate the political leader for the money he contributed.

Flash forward. In November 2009, Algerian authorities charged Orascom with a USD 600 million tax claim and penalties for fiscal years 2004 to 2007. In 2010, Wind Hellas, Naguib Sawiris' Greek subsidiary of Italy's Wind Telecomunicazioni, another of Naguib Sawiris' acquisitions, went bankrupt.

Too bad Arafat isn't around to bail out Naguib Sawiris again. Naguib Sawiris seems to get a lot accomplished by stealing public funds from a respected leader in two simple meetings.

Will Naguib Sawiris use this year's World Cup to manipulate Orascom's stocks again?

It's World Cup time again. And for the second year in a row Orascom Telecom's chairman Naguib Sawiris is in big economic trouble. Last week Naguib Sawiris issued an Orascom statement indicating that Algeria's government was ready to begin discussions concerning a possible sale of Orascom's Algerian unit, Djezzy, to MTN.

As a result of Naguib Sawiris' annoucement, Orascom's stocks jumped 3.1 percent.

Too bad Naguib Sawiris was lying and yet again manipulating stock prices, because Naguib Sawiris then issued a separate statement announcing that talks between Weather Investments (Naguib Sawiris now controls Orascom through Weather) and MTN over the sale of Djezzy failed. As The Wall Street Journal pointed out, now Naguib Sawiris needs to sell some of the company's assets to raise cash and settle problems with the Algerian government.

This is how the problems unfolded:

In May 2008 and again in July 2009, Orascom Telecom Algeria was informed that it was the subject of a tax audit in Algeria concerning the years 2005 to 2007. In June 2008 the audit commenced. The Algerian regulatory authorities sought a USD 596.6 tax adjustment claim for back taxes concerning the years 2005 to 2007. Yet Naguib Sawiris didn't release this information until the day of a World Cup qualifying match between Algeria and Egypt. Not surprisingly violence broke out.

Again, this is Naguib Sawiris' way of keeping secrets that also maintain the share price of Orascom. Not only did Naguib Sawiris hide the gigantic tax claim from his own shareholders, thereby breaching the law by manipulating the price of the company's stocks, but by releasing the information on the same day as the heated World Cup game of Egypt v. Algeria, he used the sporting battle to make it look like Algeria was waging a political and economic attack against Egypt, as a French-language article in El Watan pointed out.

Secrecy, lies, stock manipulation, and football. What will Naguib Sawiris do this season to celebrate the World Cup?