VTB first on the block as Russia embarks on mass state sell-off

Russia is to put four large state-owned companies up for sale as it rushes to refill its reserves. Deputy finance minister Sergei Storchak also tells GlobalMarkets that the country will more than double its capital-raising capacity in 2017

  • By Elliot Wilson, Virginia Furness
  • 09 Oct 2016
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Day 4Slow-growing Russia is looking to aggressively patch up the yawning holes in its budget by pushing through a series of big privatisations of state-run corporate giants in the months ahead, senior officials said.

Talking exclusively to GlobalMarkets, Russia’s deputy finance minister Sergei Storchak said: “Privatisation is something we are working on. It is important that the government is making decisions in this field but there are hesitations. We want to reduce the role of the state in the economy.”

First up in the fire sale, as Russia looks to top up a rapidly-depleting rainy day fund, will be VTB Bank, 60.9% owned by the government, and Russian shipping giant Sovkomflot. Two other assets set to be placed on the slab are oil firms Rosneft and Bashneft, both hit hard by US and European sanctions.

“Sovkomflot will be sold; VTB will be sold,” Storchak said, adding: “VTB considers themselves purely Russian but they’ve become as global as many of the international banks.” Another high-ranking official in the Russian government corroborated the information, adding that the state would likely sell a minority stake in VTB, but pursue a “majority or total” sale of Sovkomflot, not before early 2017.

The deputy finance minister said Russia would continue to pepper the market with sovereign bonds in the months ahead. A $1.75bn, 10 year Eurobond was completed in May, $1bn of which was sold to foreign investors, with another $1.25bn to be raised from the global capital markets by end-2016.

Storchak said Russia would more than double its capital-raising capacity in 2017. “We need to be permanently in the market. I was happy with the outcome of the [May] bond, but I would prefer it to be business as usual. It was a lot of administrative work and the allocations were a headache. Next year we have a bigger figure in [mind]. We will be looking to raise $7bn in the markets.”


DAMPENING INFLATION

Meanwhile, Ksenia Yudaeva, first deputy governor of the Bank of Russia, pointed to a raft of legislation designed to tamp down inflation, free up capital onshore, and reinvigorate the sluggish economy, which is tipped by the IMF to shrink by 1.2% this year, before growing 1% in 2017.

“We are introducing measures designed to inject long-term momentum into the economy,” Yudaeva told GlobalMarkets. “We need a thriving onshore base of major institutional investors, which means creating and supporting insurance firms and pension funds. It means strengthening financial supervision and regulation, and making our capital markets deeper and more sustainable.”

Although inflation remained on track to fall to 4% by end-2017, Yudaeva said Russia had little choice but to continue to tap global capital markets for fresh funding. “We are running out of money in one of our reserve funds, so we will have to borrow more in order to finance our future budget deficits. This is one of the reasons why we have to return to the international debt markets — there is no other choice.”

The Reserve Fund, which peaked at $142.6bn in 2008, fell to $32.2bn in August, a month-on-month decrease of 16%, as the government rushed to swap foreign currency into roubles to cover the deficit.

  • By Elliot Wilson, Virginia Furness
  • 09 Oct 2016

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 30,363.50 109 7.56%
2 JPMorgan 27,423.07 94 6.82%
3 Goldman Sachs 27,365.68 53 6.81%
4 Barclays 25,009.79 63 6.22%
5 Deutsche Bank 22,679.02 69 5.64%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 Mizuho 299.85 1 21.73%
1 ING 299.85 1 21.73%
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1 BNP Paribas 299.85 1 21.73%
5 UBS 60.22 1 4.36%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 Goldman Sachs 1,607.28 5 22.59%
2 Credit Suisse 1,301.65 4 18.30%
3 UBS 970.80 3 13.65%
4 BNP Paribas 522.35 4 7.34%
5 SG Corporate & Investment Banking 444.17 3 6.24%