Applications for participation in the privatization of Russian state-owned companies, according to “Izvestia”, has filed two U.S. and six European banks. This is J. P. Morgan, Citi, Barclays, Deutsche Bank, Raiffeisen, Credit Suisse, UBS, Unicredit.
“About five foreign banks” have applied to the privatization of Russian state companies, said this week the Deputy Minister of economic development Nikolay Podguzov. According to him, they can be co-organizers with the mandates previously received by credit institutions. He pointed out that among them there are American and European, without specifying exactly what the organization wished to participate in Russian privatization. At the end of March Nikolay Podguzov said that about a dozen foreign banks have applied.
The source of “Izvestiya”, close to the organization of privatization, called eight credit institutions: J. P. Morgan Bank International, “Citigroup Global Markets”, “Barclays Capital”, Deutsche Bank, “Raiffeisen Investment”, Bank Credit Suisse (Moscow), UBS Bank, “UniCredit Securities”. Information source and confirmed the interlocutor of “Izvestia”, close to the government. The credit institution refused to comment.
The decision to sell this year stakes in five major state-owned companies — “Rosneft”, “Bashneft”, VTB, ALROSA, Sovcomflot — President Vladimir Putin announced in January. According to the Minister of economic development Alexei Ulyukayev, from the privatization of large companies can be sold for 800 billion.
The press service of the Ministry of economic development “news” confirmed that the applied Bank Credit Suisse (Moscow), UBS Bank, “Citigroup global markets”, “Raiffeisen investment”, “UniCredit securities”.
“The final decision on selection of legal persons for the organization on behalf of the Russian Federation sale of privatized Federal property and (or) the exercise of the functions of the seller will be accepted by the government of the Russian Federation and will be known after the orders of the government of the Russian Federation”, — said the press service of the Ministry of economic development. It also said that the approved investment consultants can bring your organization for the sale of privatized property.
“It is their responsibility. Hard there is no agreement, but the Ministry of economic development informed of the intention to engage such subcontractors. This decision will depend on the structure of the transaction”, — stressed in the Ministry of economic development.
The availability of applications from foreign banks, experts believe, of fundamental importance, since, as reported by foreign media, most American and European credit institutions have refused to participate in the Russian privatization, to not suspect to be in violation of sanctions.
Chief economist, Eurasian development Bank Yaroslav Lisovolik believes that the involvement of Western, including U.S., banks are very important for privatization. In his opinion, this gives the possibility of expanding the investor base, including institutional.
Is that key banks in the area of placement and financial transactions in the financial markets showed a willingness to participate in the privatization, allows counting on a significant expansion of the number and geographic coverage of investors. And the wider the scope in terms of geography and categories of investors, the better the prospects for asset sales, says Yaroslav Lissovolik.
He also notes that these credit institutions have a successful publishing experience, not only in Europe and USA, but also in the Asian region. However, he found it difficult to answer the question of why foreign banks are not afraid to get under the charges of violating sanctions.
As suggested by one of the investment bankers, who wished to remain anonymous, the interest in our placement may be motivated by a desire to at least partially offset the cost of the huge fines that have to pay the banks. So, in February it became known that British Bank Barclays and Credit Suisse will pay U.S. authorities $70 million and $84 million respectively. The funds of the credit institution shall send to the settlement of lawsuits. They were accused of suspicious transactions with a “dark liquidity”. It was previously reported that nine banks — Bank of America, Barclays, BNP Paribas, Citi, Goldman Sachs, HSBC, JP Morgan, RBS and UBS — will pay affected investors more than $2 billion of Such agreement of extrajudicial settlement they had reached after allegations of manipulation with the exchange rates. And in may of last year, Citi, JP Morgan Chase, Barclays, RBS and UBS have pleaded guilty in the fraud on the foreign exchange markets and had to pay a total of $6 billion in fines under an unprecedented agreement with the U.S. Department of justice.
The interlocutor of “Izvestia” noted that the remuneration for participation in privatization will depend on the capacity in which it will be performing banks. He explained that we are talking about a percentage of the transaction.
Chief economist at the National rating Agency (NRA) Maxim Vasin believes that the risk of falling foul of sanctions depends heavily on the quality in which banks will participate in the privatization. According to him, if they will act as the organizers, the risk is definitely there, though, he reminds us, not all Russian state-owned companies are under sanctions.
But banks can act as agents to buy shares for its clients, including international. While sanctions do not directly prohibit broker, only buy and in addition, not all state-owned companies are under sanctions, — says Maxim Vasin.
He also suggests that a possible situation in which the application is a statement of intent, that is indicative statement of interest of banks to process regardless of sanctions. Chief economist of the NRA indicates that in the future each case, the Issuer and the privatization of banks will be treated separately, but those who submit bids may have informational or other advantages in filing further applications.
