16 Dec 2016 Cases

ICSID Tribunal Rules in Favor of Compass Lexecon's Clients, Tenaris and Talta, in Expropriation Case Against Venezuela

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Compass Lexecon experts, Dr. Manuel A. Abdala and Mr. Pablo López Zadicoff were retained by Tenaris S.A. and Talta Trading e Marketing Sociedade Unipessoal LDA, to provide expert testimony on the economic impact of Venezuela's expropriation of Tavsa, a seamless steel tube manufacturer; and Comsigua, a major producer of hot briquetted iron (HBI).

The Tribunal sided with Dr. Abdala and Mr. Zadicoff's chosen methodologies and date of valuation (April 2008) to determine the value of the expropriated assets, which included a DCF valuation exercise as well as comparable multiples from transactions and traded companies. The Tribunal awarded a total compensation of $137 million on the Claimant's stakes on both companies plus pre-award interest at Libor + 4% per year, for a total amount of $ 212.6 million as of the date of the award.

In the case of the valuation of Tavsa, the Tribunal endorsed Compass Lexecon's expert opinion on a number of critical valuation assumptions in the discounted cash flow exercise, including the reference sources and formula to forecast future prices for seamless steel tubes, the base year to project operating costs, the formula to forecast periodic capital expenditures based on annual amortization values; and the size of the country risk premium (at 460 basis points) in the discount rate, among others. Likewise, the Tribunal found that the traded companies used as comparables for several valuation multiples recommended by Dr. Abdala and Mr. Lopez Zadicoff served the purpose to confirm the reasonability of the DCF results. As it relates to Comsigua, the Tribunal found that valuation methods based on past offers, transactions and comparable traded multiples, as proposed by Compass Lexecon's experts, were relevant to determine its fair market value.

Dr. Abdala and Mr. Zadicoff were assisted by a team of professionals under the leadership of Andres Casserly in Compass Lexecon's Buenos Aires office. Compass Lexecon worked with a legal team led by Nigel Blackaby and Caroline Richard of Freshfields Bruckhaus Deringer LLP.

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