Page 2 of 2 Oligarchs on opposite sides of cash crisis
By John Helmer
Raffeisen and Commerzbank. That obligation was for 364 days at 1.9% over LIBOR
(London Interbank Offered Rate, a benchmark).
At the same time as this debt was paid, Soyuz announced that it would take a
capital replenishment from Deripaska's holding totaling 5.7 billion rubles. The
holding issued a statement that it "is closely monitoring the situation on the
Russian financial markets. Bank SOYUZ being part of the group duly fulfills all
its obligations on transactions with counteragents, including REPO deals. Bank
SOYUZ has got no exposure to the financial institutions which are facing
difficulties due to the market situation. In case the negative trend in the
market progresses,
Basic Element Company will make all necessary steps to support liquidity
position of the bank."
A second unit of the holding, Glavstroy Corporation, is also reported to be
feeling the pinch and in need of fresh cash. Described on the website of Basic
Element as a key asset in its construction division, Glavstroy "is a vertically
integrated corporation founded in 2006 by merging several companies with 50
years of operations behind them. The corporation consists of four divisions
uniting dozens of industrial and construction units: Glavmosstroy -
Construction Division, Mospromstroymaterialy - Production Division,
Glavstroy-Engineering Division and Glavstroy Housing and Development Division.
Glavmosstroy was founded in 1954 and is the oldest of the companies owned by
Glavstroy Corporation. In the fifty years of its existence, Glavmosstroy has
built three-quarters of Moscow's modern housing stock, which is equivalent to
some 150 million square meters." Much of the project portfolio listed is in the
currently cash-short residential segment of the construction market, while some
projects depend on complicated and slow state funding arrangements.
Moscow analysts specializing in the real estate and construction sector are
unwilling to talk on the record about Glavstroy and Glavmosstroy. "Now the
sector is having difficulties - I wouldn't hide this," one analyst said. "Each
company has loans that have to be refinanced. I don't want to talk about
Glavmosstroy on the record, as we are not covering it." Another source said
Glavstroy is a company with strong governmental support. "I doubt they will be
in deep trouble, as Deripaska will definitely find the money."
Another analyst said there are rumors in the market that Glavmosstroy is having
problems with short-term financing. It is speculated that this in turn has put
pressure on Bank Soyuz, and the bank in its turn on Deripaska and Rusal. Alexei
Yazukov of Renaissance Capital told Asia Times Online: "Many of the large
developers are moving to delay their large projects, or even putting them
aside. All unstarted projects they intend to suspend. The reason for that is
that money on the market is very difficult to find, or very expensive."
For builders committed to priority state projects, such as Glavstroy's
commitments at Sochi and St Petersburg, the timing of bail-out state financing
is now crucial.
Vitaly Korolev, a spokesman for Glavstroy, told Asia Times Online: "According
to the information that I have, we haven't frozen any projects in Moscow. In St
Petersburg, our projects are in the pre-construction phase. The costly
construction phase will start only in 2009." He declined to respond to market
rumors which lack specificity and apply to the entire sector.
Since Rusal remains privately owned and unlisted, there are no public financial
reports, and Rusal declines to respond to questions relating to the two
financing issues viewed internationally as the key to Deripaska's financial
condition - can he borrow the funds required to meet the UK High Court claim of
former partner Mikhail Chernoy (sometimes referred to as Michael Cherney)? Can
he borrow the funds he will be required to pay other shareholders in Rusal -
Prokhorov, Victor Vekselberg, who holds about 19% of Rusal, and Glencore
International, the world's biggest commodity-trading company - if Rusal does
not achieve a public listing for its shares on an exchange agreed to by the
minority shareholders within 12 months?
This week too in London, Deripaska will go to the appeals court to try to
overturn a July ruling by the High Court that he should face trial on claims
from his former partner, Chernoy.
At Deripaska's holding company, spokesman Sergei Rybak said: "All Norilsk
Nickel issues are handled by the Rusal company, as they are the shareholder. I
can't comment."
At Rusal, spokesman Olga Sonarova and Vera Kurochkina were asked to clarify
Rusal's current liquidity position and to identify how much of the company's
estimated total indebtedness of $8 billion falls due between now and next
March? Asia Times Online also asked Rusal to say if it has had margin calls
from the banks in the $4.5 billion syndicate; and what its debt and deposit
position is at Bank Soyuz.
The answers to these questions are the numbers that allow the market to
calculate the bubble metric between the costly ambition Deripaska and Rusal
have pursued for the past year and the cash position in which the group finds
itself at the moment, net of the obligations it owes.
At first, Rusal declined to answer directly. Then Kurochkina indirectly
confirmed that Rusal is in negotiations with its bank lenders over the $4.5
billion loan. "It was a bridge-financing," Kurochkina is quoted as telling a
Moscow newspaper, "and we already carry on negotiations with the banks for
refinancing of this debt. Probably we will make it even before the term fixed."
John Helmer has been a Moscow-based correspondent since 1989,
specializing in the coverage of Russian business.
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