Russian oligarch-backed LetterOne sues PE firm that manages its billions

LetterOne, the UK-based investment group backed by sanctions-hit Russian oligarchs, is suing a private equity firm that manages about $5bn of its money.

The London-based investor is trying to force Pamplona Capital Management to open its books on the funds that LetterOne has ploughed into the buyout group, which is trying to cut ties with it following Russia’s full-scale invasion of Ukraine.

Subsidiaries of LetterOne are “seeking to enforce their rights as limited partners to inspect books and records” of Pamplona, according to US court filings seen by the Financial Times.

The dispute reveals the extent to which the relationship between the groups has soured since sanctions were imposed by the UK and EU on LetterOne shareholders Mikhail Fridman, Petr Aven and German Khan.

Pamplona was founded by Alex Knaster, who used to run Russia’s Alfa-Bank, the sanctions-hit lender where Fridman was founder and president.

In the wake of the invasion, Pamplona said it wanted to end all “direct or indirect exposure to any Russian capital” — a step that could be achieved by either selling LetterOne’s stakes or the companies Pamplona had bought. Pamplona has appointed Jefferies to advise it on how to cut its ties to LetterOne.

LetterOne, which is not under sanctions itself, has also sought to separate itself from its Russian owners by freezing their stakes and dividends, and cutting them off from its operations and offices. It is now led by Lord Mervyn Davies, a former UK Labour government minister.

It said its cash represented 90 per cent of the money in Pamplona’s funds, with a value of about $5bn. LetterOne told the FT that in recent months Pamplona had taken “unilateral action that threatens material harm” to its investments.

It accused Pamplona of an “ongoing and unjustified refusal to share information with its largest limited partner” at a time when Pamplona was seeking to sell its investments.

LetterOne said “repeated attempts by L1 to engage with Pamplona on their proposed actions and the status of current assets have been rebuffed, dismissed or ignored and led to LetterOne issuing a formal demand for access to books and records”.

It said that because Pamplona had not complied with that demand, “regrettably, LetterOne has been left with no choice but to resort to legal action in an attempt to resolve this issue”. 

In response, Pamplona said it was “quite surprised and puzzled by LetterOne’s new requests” but would “of course comply fully to the extent provided for” in its investor agreement with LetterOne.

It said it was “aware of the books and records request and can confirm that LetterOne have or will shortly receive almost all material elements of that request, and communication has been ongoing throughout”.

It added that LetterOne had “received and continues to receive the information to which they are entitled under the limited partnership agreement”.

Pamplona, which has an office on London’s Park Lane, has bought companies including Yorkshire-based pest control company Pelsis and Dutch snack company Signature Foods.

One person close to the dispute said LetterOne was arguing that Pamplona had not been transparent enough about the valuation of the portfolio, pointing out that LetterOne had not seen any memoranda provided to potential purchasers of its stakes.

The case shows the level of uncertainty still being caused across western financial markets by sanctions on Russian oligarchs who own billions of dollars of assets, including businesses and homes in the UK, EU and US. 

In March, Holland & Barrett, the British healthcare retailer owned by LetterOne, struggled to make a scheduled interest payment because one of its banks had difficulty processing the transaction.

Additional reporting by Sujeet Indap in New York