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Len Ganley Stance
22-12-2008, 09:51
From Gloomberg.................

Oligarchs Seek $78 Billion as Credit Seizure Empowers Putin

By Yuriy Humber and Torrey Clark

Dec. 22 (Bloomberg) -- Russian oligarchs are lining up for $78 billion of Kremlin loans to survive the credit squeeze, handing Prime Minister Vladimir Putin the opportunity to increase government control of the nation’s biggest companies.

Just 12 years after they gained ownership of the former Soviet Union’s industries by bailing out the government, the tables have been turned. More than 100 business leaders are vying for loans from Putin and the administration of President Dmitry Medvedev because Russian companies have about $110 billion of foreign obligations due next year, according to the central bank, double the total owed in Brazil, India and China.

Business leaders who tripled international debt in the past three years are putting up part of their stock as collateral for government support because they’ve been hobbled by tumbling commodity prices and the biggest drop in the ruble since Russia’s default in 1998. Putin already is aiding billionaires Roman Abramovich and Oleg Deripaska and considering requests from Dmitry Pumpyansky of pipemaker OAO TMK, OAO Severstal’s Alexei Mordashov and AFK Sistema’s Vladimir Yevtushenkov.

“Some of them will definitely lose their property, either to the state or to investors,” billionaire Alexander Lebedev, 49, said in a Dec. 8 interview, 11 days before Deutsche Bank AG demanded early repayment of a loan guaranteed by 3 percent of Moscow-based ZAO National Reserve Corp.’s 29 percent stake in OAO Aeroflot, the national airline. “They’ve been over-borrowing and sales of their companies have been falling.”

Loans-for-Shares

The oligarchs, Russian business leaders who used their political influence to help gain assets after the collapse of communism, essentially dictated the policies that allowed them to gain control of the nation’s biggest companies in the 1990s by providing financing to the government that was never repaid.

Anatoly Chubais, who oversaw the government’s sale of assets through the so-called loan-for-shares program, said in an interview in 2000 that the plan was necessary to create “big private capital” and help then-President Boris Yeltsin win reelection in 1996 to prevent a return to communism. Chubais, 53, is now chief executive officer of Moscow-based Russian Nanotechnology Corp.

Vnesheconombank, the Russian state lender known as VEB, is responsible for handling the bailouts. In return for one-year loans, VEB is requiring a representative at the company and the right to veto any debt or major asset sale, according to the bank’s Web site. Putin, 56, is head of its supervisory board. Borrowers offer shares, assets or export revenue as collateral.

“It’s extremely unlikely they’ll all be able to repay in a year,” said Zina Psiola, a money manager at Clariden Leu AG in Zurich with $220 million in Russian equities. “Some oligarchs will no longer be oligarchs.”

Margin Calls

At least 10 of the 25 wealthiest owners have faced margin calls from lenders since August as Russia’s worst financial crisis since 1998 wiped $230 billion from the value of their equity, according to data compiled by Deutsche Bank and Bloomberg.

Profits for four of Russia’s largest steel producers as well as Moscow-based TMK, the biggest maker of pipes for the oil and gas industry, will fall by about 50 percent to $10.5 billion next year as prices of the metal plunge, according to Clemens Grafe, an economist at UBS AG in London. That may leave the companies unable to pay for anything beyond their $10.3 billion of debt in 2009.

“If they have to pay this then they have no money for capital expenditure, no nothing,” Grafe said.

Prospects for refinancing debt are dwindling. Russia’s war with Georgia, a 75 percent drop in oil and the worsening credit crisis led investors to pull $211 billion from the country’s stocks, bonds and currency since August, according to BNP Paribas SA. The withdrawals weakened the ruble by 17 percent against the dollar, forcing the government to drain $163 billion, or 27 percent, from foreign-currency reserves.

Defaults

Russian companies have about twice as much foreign debt due in 2009 than the $56 billion total owed by companies and the governments of China, India, and Brazil combined, according to data compiled by Commerzbank AG and RBC Capital Markets.

Greater state involvement may reassure investors, said Jerome Booth, head of research at Ashmore Group Plc in London, which manages $32 billion of emerging-market assets including Russian corporate debt.

“There’s less chance of mass defaults in Russia than in Western Europe,” Booth said. “There’s a degree of state control in the economy already, so this will be more of the same.”

The prime minister, saying he has no intention of nationalizing the economy, pledged on Dec. 4 to offer loans and buy stakes in companies that solicit help, releasing collateral and selling back the holdings later.

Abramovich, Deripaska

Putin, who served eight years as president before becoming prime minister, provided $12 billion of loans since October to companies such as those backed by Abramovich, 42, and Deripaska, 40, and pledged $38 billion more. That covers only half the amount sought. Among the applicants is Pumpyansky, 44, of TMK, which owes $1.7 billion in 2009, more than forecast earnings. Yields on TMK’s dollar bonds due September 2009 topped 80 percent last month. TMK plans to delay some investments and will seeking to refinance with longer-term debt, according to an e-mailed statement.

Deripaska is selling Moscow-based Soyuz Bank and may part with control of insurer OAO Ingosstrakh in Moscow, Vedomosti reported last week. Named Russia’s richest man by Forbes in April, Deripaska ceded stakes in auto-parts maker Magna International Inc. in Canada and German builder Hochtief AG to banks in October after the stocks lost more than half of their market value.

Pending Requests

VEB’s $4.5 billion loan allowed Deripaska’s United Co. Rusal to keep a 25 percent stake in OAO GMK Norilsk Nickel, Russia’s biggest metals producer. A further $1.8 billion went to Evraz, the steelmaker part-owned by Abramovich.

Yevtushenkov’s Sistema in Moscow may seek as much as $2 billion from Moscow-based VEB to pay debts next year.

Moscow-based Evraz and Cherepovets-based Severstal didn’t respond to requests for comments.

“Not all of them are going to be helped out,” said Kieran Curtis, who helps manage $787 million in emerging market debt at Aviva Investors Ltd. in London. “I’m not convinced we know who is going to get state funds and that will be a major factor in terms of rollovers and redemptions.”

Without a revival in commodity prices or state help, some Russian companies risk failing, according to Pacific Investment Management Co., which runs the world’s largest bond fund.

“It really depends on whether they can weather the storm with metals prices,” said Tim Haaf, Pimco emerging-market fund manager in Munich, who helps oversee $50 billion of emerging- market debt including Russian bonds. “We’re very conservative on Russia.”

Scrat335
22-12-2008, 18:30
I think it would be a good thing if some industries were taken over.

I just did some research on Ural Kali. A potash mine in Siberia. About 2 years ago a sinkhole opened up because of poor drainage and what basically boils down too bad maintenance and mining practices.

The original hole was first measured at app 100X50 meters. Now it is 5 times that size. It has began to threaten a major railway line and the utilities of the city itself.

Why was this allowed to happen?

First off, it is private property. The Russian government had nothing to do with it and it only came to their attention when the train engineers came to fear using the line.

Are not the owners responsible for this? They are responsible for the mine as they do own it, correct? It could have been remedied easily in the first stages. Now it is going to be way more expensive and the latest is considering the size, it's not practical to fix.
This is a classic example of willful disregard in persuit of profit. The owners were taking investments in the mine WHEN IT WAS NOT EVEN FUNCTIONING!! They simply told no one of situation, not many investors took a trip to see the mine itself.
Not only do I think the government should take this mine over, I think the owners and the management should be tossed in the gulag. They had options, they did not take them. Now through willful neglect the burden has gone to the people of Russia and the city of Ural Kali.

Carbo
22-12-2008, 21:35
I think it would be a good thing if some industries were taken over.

I just did some research on Ural Kali. A potash mine in Siberia. About 2 years ago a sinkhole opened up because of poor drainage and what basically boils down too bad maintenance and mining practices.

The original hole was first measured at app 100X50 meters. Now it is 5 times that size. It has began to threaten a major railway line and the utilities of the city itself.

Why was this allowed to happen?

First off, it is private property. The Russian government had nothing to do with it and it only came to their attention when the train engineers came to fear using the line.

Are not the owners responsible for this? They are responsible for the mine as they do own it, correct? It could have been remedied easily in the first stages. Now it is going to be way more expensive and the latest is considering the size, it's not practical to fix.
This is a classic example of willful disregard in persuit of profit. The owners were taking investments in the mine WHEN IT WAS NOT EVEN FUNCTIONING!! They simply told no one of situation, not many investors took a trip to see the mine itself.
Not only do I think the government should take this mine over, I think the owners and the management should be tossed in the gulag. They had options, they did not take them. Now through willful neglect the burden has gone to the people of Russia and the city of Ural Kali.
I bet, Scrat, that you're one of the most vociferous opponents of the current Russian penal system.

Listen, the reason this will never be prosecuted is because the local government, and perhaps national, would have been complicit in the whole thing.

And therein lies the rub. There is a huge problem with corporate governance (namely, the internal workings and transparency of businesses) and corporate regulation, namely the regulation from the government.

It's the guys who should have been overseeing this kind of thing that need stringing up.

Gypsy
22-12-2008, 21:49
I bet, Scrat, that you're one of the most vociferous opponents of the current Russian penal system.

Listen, the reason this will never be prosecuted is because the local government, and perhaps national, would have been complicit in the whole thing.

And therein lies the rub. There is a huge problem with corporate governance (namely, the internal workings and transparency of businesses) and corporate regulation, namely the regulation from the government.

It's the guys who should have been overseeing this kind of thing that need stringing up.
You are right.

But how do you change it when it is rotten from the very top on down?

Scrat335
23-12-2008, 04:48
It's the guys who should have been overseeing this kind of thing that need stringing up.
I agree Carbo, it's pretty mid boggling that people were still investing in this enterprise. The owners had to solicit this capital. It seems the world over the watchdogs of the industries have completely dropped the ball. It doesn't void the reponsibility of the owner. He could have stopped the situation from getting worse, it turns out he needed another villa in Spain.


I bet, Scrat, that you're one of the most vociferous opponents of the current Russian penal system.

Sarcasm aside, I have an answer to that.

Carbo
23-12-2008, 08:55
I agree Carbo, it's pretty mid boggling that people were still investing in this enterprise. The owners had to solicit this capital. It seems the world over the watchdogs of the industries have completely dropped the ball. It doesn't void the reponsibility of the owner. He could have stopped the situation from getting worse, it turns out he needed another villa in Spain.



Sarcasm aside, I have an answer to that.

Did you know, for example, that there are no official, cast in stone laws about insider trading in Russia? Certainly there is no equivalent to the SEC.

Amazing.

Scrat335
24-12-2008, 19:25
I can see what you're saying although I didn't know. Considering the mess America is in now, did we?

Our SEC/watchdogs have done a very poor job as of late.

It doesn't seem that Russians have following the law a high priority on their list in general. It's more of an honor type system.

is4fun
24-12-2008, 19:39
Did you know, for example, that there are no official, cast in stone laws about insider trading in Russia? Certainly there is no equivalent to the SEC.

Amazing.

Not true, there are insider trading laws in Russia but like most of the laws in Russia they are not enforced. One must have lived here for a significant period of time to understand the underlying significance to the previous statement.

Judge
24-12-2008, 21:41
The Russian Forbes rich list is out soon..Instead of a billionaires list it will be a millionaires list...:11215:

is4fun
24-12-2008, 21:44
The Russian Forbes rich list will be out soon..Instead of a billionaires list it will be a millionaires list...:11215:

Very true :) As the list will reveal the assets still in Russia.

Judge
24-12-2008, 21:57
Very true :) As the list will reveal the assets still in Russia.


We might find a few of the big names off the list...

I'm wondering if any of the Russian oligarchs lost money by investing in Bernard Madoff ???

is4fun
24-12-2008, 22:00
Given the transparency in Russia would one actualy admit it? LOL

Judge
24-12-2008, 22:13
Given the transparency in Russia would one actualy admit it? LOL

I'm sure it will come out if a russian did invest...One of the wealthiest women in the world lost a few $$$$$..The guy who invested her money slashed his wrists..

is4fun
24-12-2008, 22:28
Yes, I did hear about that sorry to say. The regs in the states were way off the ball and for so many years. Not hard to do really, especially if one builds so much confidence over the years. It must have been intimidating even to talk with him regarding his company given his fame, money, success and once being a NASDQ big wig. There will always be cracks in any system. In the end, the investor is alway held responsible by losing his/her cash. The man will go to jail but the investors will never be compensated for thier losses.

Judge
24-12-2008, 22:44
Yes, I did hear about that sorry to say. The regs in the states were way off the ball and for so many years. Not hard to do really, especially if one builds so much confidence over the years. It must have been intimidating even to talk with him regarding his company given his fame, money, success and once being a NASDQ big wig. There will always be cracks in any system. In the end, the investor is alway held responsible by losing his/her cash. The man will go to jail but the investors will never be compensated for thier losses.

Or the regs were bribed:shhhhhh::shhhhhh:
Madoff couldn't have done this all alone...there must have been many others who were in on it.. Not cracks,this goes to show how corrupt the system is...
He will go to jail unless he takes his own life or someone puts a hit on him to shut him up...

is4fun
24-12-2008, 22:58
He will go to jail. It is not at all impossible to act alone in this situation and I do believe he did act alone. A Ponzi scam. Read about Charles Ponzi on Wikki. There are countless others that have used this pyramid scheme throughout the years. You can do it yourself if you wanted to over the internet. Pretty simple, all one needs is initial capital and then a return to investors from new capital. When the new capital is up, the jig is up! His long standing success was to his ability to raise new capital and prevent close scrutiny of his books. After all, it was a private fund and private companies need not disclose the same information as those of public ones.

Judge
24-12-2008, 23:25
He will go to jail. It is not at all impossible to act alone in this situation and I do believe he did act alone. A Ponzi scam. Read about Charles Ponzi on Wikki. There are countless others that have used this pyramid scheme throughout the years. You can do it yourself if you wanted to over the internet. Pretty simple, all one needs is initial capital and then a return to investors from new capital. When the new capital is up, the jig is up! His long standing success was to his ability to raise new capital and prevent close scrutiny of his books. After all, it was a private fund and private companies need not disclose the same information as those of public ones.

True enough,but questions were asked and he got away with it for so long..Like you said in another post.. people were scared of him.

If he did act alone or with others it will go down as an amazing scam.I can see Madoff doing a Robert Maxwell .Mandoff could take the fall and save financial institutions billions..
I'll start a new thread about Madoff because Lenny will get his knickers in a twist and scream HIJACK!!!!:)