RusAl's proposed IPO is causing jitters on Wall Street where Goldman Sachs quit its position as listing adviser and bankers are worrying about dealing with debts and Oleg Deripaska.
The company, which is the world's largest aluminium producer, is hoping for a December listing in Hong Kong and Paris but is in a race against time to sort out its burgeoning loan portfolio by the listing deadline of November 19.
Troubled tycoon Deripaska, the majority shareholder in the firm, is reportedly on the verge of restructuring $7.3 billion of the firm's debts with foreign creditors, but would still need to secure the approval of more than 70 banks for the offering to take place.
"We believe RusAl may be successful in restructuring its debt ahead of its IPO, which is planned for December this year, but faces significant hurdles," said CitiBank in a research report.
A deal with fellow oligarch Mikhail Prokhorov was due to go through at the weekend a source close to RIA Novosti said, which would see Russia's richest man take a 19.16 per cent stake in the company.
Conclusion of the deal has not been confirmed but it is thought Prokhorov will convert $1.8 billion in debt to gain the extra 5.16 per cent share.
Analysts say that the IPO will be good for Russia's metals and mining sector if it goes ahead as well as for Deripaska, who is reportedly under pressure from other shareholders, including Prokhorov, to raise cash for the debt-laden firm.
"The deal could also increase the interest in the Norilsk Nickel stock, given that UC Rusal owns a 25 per cent stake in Norilsk Nickel; hence this stake has substantial value," said UBS in a note.
American bankers, however, also have concerns about Deripaska and the law suit filed against him in London by Michael Cherney, who claims he is owed a stake in the firm.
Reports in the Wall Street Journal quote a person familiar with the situation saying that investors "are just not comfortable sponsoring Deripaska."
The metals magnate recently visited the US, meeting with top bankers but his visa status in the US remains in doubt, with some reports claiming he is banned from entering and doesn't hold a visa.
Sunday, 15 November 2009
Moscow bullish on bonds
Russia's return to the debt market for the first time in a decade got a positive reaction from investors who appear ready to forgive and forget the 1998 default that sent stocks crashing.
A high profile delegation led by Finance Minister Alexei Kudrin arrived in London last week seeking to persuade the City that their cash was safe in the government's hands.
We think that currently the assessment of risk in Russia is elevated so this ... conversation ... is important," Reuters reported a source in the delegation as saying.
Investors have warmed to the idea after prudent measures allowed the country to build up a stockpile of foreign currency and two reserve funds, decreasing the risk of default.
"Russia has a considerable amount of foreign reserves, around $400 million, so just on that basis it is very unlikely Russia will be unable to pay their creditors," said Tom Mundy, equities analyst at Renaissance Capital.
The main danger to sovereign debt remains the oil price, with a large proportion of the government's budget inflows coming from crude. However, a conservative estimate of $58 per barrel for 2010 from the government is well below Friday's close of $77.4.
"Our forecast is $85 [a barrel] next year, gradually rising to $110 by 2012 so given this trajectory, Russia's debt doesn't really look risky given the reserves," said Alexandra Yevtifyeva, chief economist at VTB Capital.
Many investors wrote off Russia as a safe bet following the 1998 default, saying they would never invest here again, but opinion turned around thanks to the ballooning oil price.
"Russia has moved beyond the stage of being a pariah on the international debt market, we're a long way past 1998," said Mundy.
Investment bank Troika Dialog said in a note two weeks ago that the bonds were only likely to raise $5 billion to $7 billion rather than the $18 billion the government was planning to place, but other analysts see no reason the placing won't be popular.
"From talking to investors, there is appetite for Russian sovereign risk," said Yevtifyeva.
A successful bond issue would ease the strain on the budget deficit, which President Dmitry Medvedev said would hit 7.5 per cent this year, while also injecting money into the ailing Russian economy.
In addition to the newly created demand the bonds could also provide a boost to Russian firms.
"If the placement goes well, it sets a benchmark for Russia on an international level, so for any Russian corporate looking to borrow on the international debt market they can work from the benchmark," said Mundy.
A high profile delegation led by Finance Minister Alexei Kudrin arrived in London last week seeking to persuade the City that their cash was safe in the government's hands.
We think that currently the assessment of risk in Russia is elevated so this ... conversation ... is important," Reuters reported a source in the delegation as saying.
Investors have warmed to the idea after prudent measures allowed the country to build up a stockpile of foreign currency and two reserve funds, decreasing the risk of default.
"Russia has a considerable amount of foreign reserves, around $400 million, so just on that basis it is very unlikely Russia will be unable to pay their creditors," said Tom Mundy, equities analyst at Renaissance Capital.
The main danger to sovereign debt remains the oil price, with a large proportion of the government's budget inflows coming from crude. However, a conservative estimate of $58 per barrel for 2010 from the government is well below Friday's close of $77.4.
"Our forecast is $85 [a barrel] next year, gradually rising to $110 by 2012 so given this trajectory, Russia's debt doesn't really look risky given the reserves," said Alexandra Yevtifyeva, chief economist at VTB Capital.
Many investors wrote off Russia as a safe bet following the 1998 default, saying they would never invest here again, but opinion turned around thanks to the ballooning oil price.
"Russia has moved beyond the stage of being a pariah on the international debt market, we're a long way past 1998," said Mundy.
Investment bank Troika Dialog said in a note two weeks ago that the bonds were only likely to raise $5 billion to $7 billion rather than the $18 billion the government was planning to place, but other analysts see no reason the placing won't be popular.
"From talking to investors, there is appetite for Russian sovereign risk," said Yevtifyeva.
A successful bond issue would ease the strain on the budget deficit, which President Dmitry Medvedev said would hit 7.5 per cent this year, while also injecting money into the ailing Russian economy.
In addition to the newly created demand the bonds could also provide a boost to Russian firms.
"If the placement goes well, it sets a benchmark for Russia on an international level, so for any Russian corporate looking to borrow on the international debt market they can work from the benchmark," said Mundy.
Communist marchers frozen out
As Europe commemorated the 20th anniversary of the fall of the Berlin Wall and the collapse of Communism, the old guard was frozen out in Moscow.
Communists gathered for a Nov. 7 rally to mark the anniversary of the 1917 Bolshevik Revolution - and Moscow communist leader Vladimir Ulas expected a crowd of more than 30,000 to march from Pushkinskaya Ploshchad to Teatralnaya Ploshchad. However, the Communist Party later blamed bad weather for a turnout officially given as just 500.
Those hardy souls who braved the chill waved placards saying "Socialism is the way out of the crisis" and "Lies about Lenin and Stalin - to the dustbin of history!"
Meanwhile, around the corner in Red Square, there was an official re-enactment of the famous parade of Nov. 7, 1941, which rallied troops' morale as the Germans advanced on Moscow. Two T-34 tanks took pride of place in this year's show.
Communists gathered for a Nov. 7 rally to mark the anniversary of the 1917 Bolshevik Revolution - and Moscow communist leader Vladimir Ulas expected a crowd of more than 30,000 to march from Pushkinskaya Ploshchad to Teatralnaya Ploshchad. However, the Communist Party later blamed bad weather for a turnout officially given as just 500.
Those hardy souls who braved the chill waved placards saying "Socialism is the way out of the crisis" and "Lies about Lenin and Stalin - to the dustbin of history!"
Meanwhile, around the corner in Red Square, there was an official re-enactment of the famous parade of Nov. 7, 1941, which rallied troops' morale as the Germans advanced on Moscow. Two T-34 tanks took pride of place in this year's show.
Poles angry, Russians baffled
Reports in a Polish magazine, Wprost, that Russian troops staged war games in September which simulated a nuclear attack on Poland and cast the nation as a potential aggressor have stoked another spat between Warsaw and Moscow.
But it was reported calls from Polish foreign minister Radoslaw Sikorski to deploy NATO forces in Central Europe which really upset the Kremlin.
With the long-running missile shield row only recently resolved, it was hoped that relations would calm down, but reports that Sikorski urged Washington to provide "strategic reassurance" for Poland bemused Russia's foreign minister, Sergei Lavrov, Reuters reported.
"I would like to be sure that he actually said that, and if he did I would be deeply astonished," Lavrov told reporters. "I'm astounded because he and I discussed in tiny detail the problems that should be resolved in the context of European security."
But it was reported calls from Polish foreign minister Radoslaw Sikorski to deploy NATO forces in Central Europe which really upset the Kremlin.
With the long-running missile shield row only recently resolved, it was hoped that relations would calm down, but reports that Sikorski urged Washington to provide "strategic reassurance" for Poland bemused Russia's foreign minister, Sergei Lavrov, Reuters reported.
"I would like to be sure that he actually said that, and if he did I would be deeply astonished," Lavrov told reporters. "I'm astounded because he and I discussed in tiny detail the problems that should be resolved in the context of European security."
Fascists held in lawyer death
Russian security services have blamed two members of a fascist gang for the murders of human rights lawyer Stanislav Markelov and journalist Anastasia Baburova.
The arrest of Nikita Tikhonov, 29, and Yevgenia Khasis, 24, was confirmed on Thursday when the two suspects appeared in court wearing black stockings over their faces - echoing the disguises worn by the killers in the January shooting in central Moscow.
Federal Security Services chief Alexander Bortnikov told President Dmitry Medvedev that the killer had confessed to the crime, one of a string of contract-style killings against journalists and human rights campaigners. Tikhonov's lawyer said on Friday that his client had confessed to the killing, but insisted he was acting alone.
Tikhonov was a suspect in the 2006 murder in Moscow of anti-fascist activist Alexander Ryukhin. Several members of a fascist gang were found guilty of Ryukhin's murder in 2007, but Tikhonov evaded arrest.
Markelov, who represented Ryukhin's family in the case, had identified Tikhonov as a member of the fascist group United Brigade-88, named after the initials in the Nazi salute "Heil Hitler", according to the Sova human rights group.
The arrest of Nikita Tikhonov, 29, and Yevgenia Khasis, 24, was confirmed on Thursday when the two suspects appeared in court wearing black stockings over their faces - echoing the disguises worn by the killers in the January shooting in central Moscow.
Federal Security Services chief Alexander Bortnikov told President Dmitry Medvedev that the killer had confessed to the crime, one of a string of contract-style killings against journalists and human rights campaigners. Tikhonov's lawyer said on Friday that his client had confessed to the killing, but insisted he was acting alone.
Tikhonov was a suspect in the 2006 murder in Moscow of anti-fascist activist Alexander Ryukhin. Several members of a fascist gang were found guilty of Ryukhin's murder in 2007, but Tikhonov evaded arrest.
Markelov, who represented Ryukhin's family in the case, had identified Tikhonov as a member of the fascist group United Brigade-88, named after the initials in the Nazi salute "Heil Hitler", according to the Sova human rights group.
Russia police corruption row rages on
The political storm triggered in Russia over accusations of police corruption is still rumbling on.
It all started when a major in the Militia, as Russia's police force is still known, went public this week with details of alleged corruption among his fellow officers in the southern Russian city of Novorossiysk.
Alexei Dymovsky had many complaints about his superiors, but perhaps the most serious was that they deliberately fabricated cases to suggest clear-up rates were improving.
What was even more shocking was that he posted his concerns on the video-sharing site YouTube for Russia and the rest of the world to see.
In the video, he called upon the Russian leadership to make the law enforcement agencies act properly.
Disgruntled man?
His superiors were furious, and the fallout has begun.
Mr Dymovsky has now been suspended, and his colleagues and former officers from the Novorossiysk police garrison accused him of "slinging mud at achievements accumulated over the years".
He was, they said, a "disgruntled man, denigrating the effort of honest officers".
They have threatened him with libel charges.
Meanwhile, the Russian Interior Minister, Rashid Nurgaliyev, has ordered an inquiry, and the Prosecutor General's Office has also taken an interest.
The authorities have acknowledged that the problems described by Major Dymovsky are widespread and far from new.
As a journalist working for the official magazine of the Soviet police in the 1980s, I heard many stories about the "pressers" - those bullying senior officers, motivated by careerism, leaving trampled people in their wake as they progressed through the ranks.
I heard dozens of stories of junior officers forced to write humiliating self-denunciations for failing to reach performance targets.
Arguably, Maj Dymovsky's greatest mistake was to voice what everybody in Russia already knows.
But what motivated him to do so?
There has always been a category of professional complainers in Russia, people convinced that the "kindly Tsar" knows nothing of the corruption permeating everything everywhere else.
Appeal to leaders
So, Maj Dymovsky called upon President Medvedev and Prime Minister Putin directly for help, bypassing both his own managers and the Interior Ministry, which controls the Militia.
Fate has not always been kind to Russia's complaining class. In Soviet times, many of them ended up in psychiatric hospitals.
Things are easier now, of course, but there are still plenty of conspiracy theories as to why Maj Dymovsky behaved as he did.
It has been suggested that he was acting on behalf of former police officers with their own grudges and agendas, or - the most serious thing you can be accused of in Russia these days - he was acting on behalf of western intelligence agencies or non-governmental groups.
Maj Dymovsky denies this.
Mr Medvedev and Mr Putin are unlikely to agree to Maj Dymovsky's request for a personal meeting.
It would be a public humiliation for the interior minister who has repeatedly pledged personally to tackle every case of corruption in the militia.
Yet it might just convince a rather cynical public that Mr Nurgaliyev is serious, were he to hold an open meeting with Maj Dymovsky to listen to his accusations in person.
History
Russia has conducted campaigns against corrupt police officers before.
From 1982-1986, a time of authoritarian Soviet rule, some 200,000 officers were dismissed.
The method was simple: those visibly living beyond their means were asked to write resignation letters. As an alternative, they were offered a spell behind bars.
So what is stopping Russian leaders from adopting similarly harsh tactics?
The respected Russian political analyst, Alexander Goltz, says: "The staircase needs to be swept from the top.
"If the state can use the police to bankrupt the oil giant, Yukos, every neighbourhood police officer understands he can do whatever he wants to the shop owner opposite."
Russia's recent experience suggests that the state is quite picky about who is labelled corrupt.
In 2008 an MP, Alexander Khinshtein, accused one of Russia's most senior judicial officials, Alexander Bastyrkin, Head of the procurator's investigative committee, of having private business interests - in contravention of the law.
Mr Khinshtein invited the official to sue him, or to resign. He did neither.
At the two men's next public meeting, Mr Bastyrkin announced that he had "explained himself to the country's leadership, and that's the only explaining he needed to do".
Russia's leadership likes to flag up its major achievement - "stability". Yet more and more Russians compare the current era with the zastoi of the late Brezhnev period.
Zastoi is Russian for stagnation, but it also refers to the crushing dullness, the emptiness, of life.
Russia now has little of the desire for reform and change that characterised society in the late 1980s.
The national mood won't allow it.
That's why it's thought that Alexei Dymovsky's demarche will have little if any effect.
It all started when a major in the Militia, as Russia's police force is still known, went public this week with details of alleged corruption among his fellow officers in the southern Russian city of Novorossiysk.
Alexei Dymovsky had many complaints about his superiors, but perhaps the most serious was that they deliberately fabricated cases to suggest clear-up rates were improving.
What was even more shocking was that he posted his concerns on the video-sharing site YouTube for Russia and the rest of the world to see.
In the video, he called upon the Russian leadership to make the law enforcement agencies act properly.
Disgruntled man?
His superiors were furious, and the fallout has begun.
Mr Dymovsky has now been suspended, and his colleagues and former officers from the Novorossiysk police garrison accused him of "slinging mud at achievements accumulated over the years".
He was, they said, a "disgruntled man, denigrating the effort of honest officers".
They have threatened him with libel charges.
Meanwhile, the Russian Interior Minister, Rashid Nurgaliyev, has ordered an inquiry, and the Prosecutor General's Office has also taken an interest.
The authorities have acknowledged that the problems described by Major Dymovsky are widespread and far from new.
As a journalist working for the official magazine of the Soviet police in the 1980s, I heard many stories about the "pressers" - those bullying senior officers, motivated by careerism, leaving trampled people in their wake as they progressed through the ranks.
I heard dozens of stories of junior officers forced to write humiliating self-denunciations for failing to reach performance targets.
Arguably, Maj Dymovsky's greatest mistake was to voice what everybody in Russia already knows.
But what motivated him to do so?
There has always been a category of professional complainers in Russia, people convinced that the "kindly Tsar" knows nothing of the corruption permeating everything everywhere else.
Appeal to leaders
So, Maj Dymovsky called upon President Medvedev and Prime Minister Putin directly for help, bypassing both his own managers and the Interior Ministry, which controls the Militia.
Fate has not always been kind to Russia's complaining class. In Soviet times, many of them ended up in psychiatric hospitals.
Things are easier now, of course, but there are still plenty of conspiracy theories as to why Maj Dymovsky behaved as he did.
It has been suggested that he was acting on behalf of former police officers with their own grudges and agendas, or - the most serious thing you can be accused of in Russia these days - he was acting on behalf of western intelligence agencies or non-governmental groups.
Maj Dymovsky denies this.
Mr Medvedev and Mr Putin are unlikely to agree to Maj Dymovsky's request for a personal meeting.
It would be a public humiliation for the interior minister who has repeatedly pledged personally to tackle every case of corruption in the militia.
Yet it might just convince a rather cynical public that Mr Nurgaliyev is serious, were he to hold an open meeting with Maj Dymovsky to listen to his accusations in person.
History
Russia has conducted campaigns against corrupt police officers before.
From 1982-1986, a time of authoritarian Soviet rule, some 200,000 officers were dismissed.
The method was simple: those visibly living beyond their means were asked to write resignation letters. As an alternative, they were offered a spell behind bars.
So what is stopping Russian leaders from adopting similarly harsh tactics?
The respected Russian political analyst, Alexander Goltz, says: "The staircase needs to be swept from the top.
"If the state can use the police to bankrupt the oil giant, Yukos, every neighbourhood police officer understands he can do whatever he wants to the shop owner opposite."
Russia's recent experience suggests that the state is quite picky about who is labelled corrupt.
In 2008 an MP, Alexander Khinshtein, accused one of Russia's most senior judicial officials, Alexander Bastyrkin, Head of the procurator's investigative committee, of having private business interests - in contravention of the law.
Mr Khinshtein invited the official to sue him, or to resign. He did neither.
At the two men's next public meeting, Mr Bastyrkin announced that he had "explained himself to the country's leadership, and that's the only explaining he needed to do".
Russia's leadership likes to flag up its major achievement - "stability". Yet more and more Russians compare the current era with the zastoi of the late Brezhnev period.
Zastoi is Russian for stagnation, but it also refers to the crushing dullness, the emptiness, of life.
Russia now has little of the desire for reform and change that characterised society in the late 1980s.
The national mood won't allow it.
That's why it's thought that Alexei Dymovsky's demarche will have little if any effect.
Diary That Helped Expose Stalin's Famine Displayed
The diaries of a British reporter who risked his reputation to expose the horrors of Stalin's murderous famine in Ukraine are to go on display on Friday.
Welsh journalist Gareth Jones snuck into Ukraine in March of 1933, at the height of an artificial famine engineered by Soviet dictator Josef Stalin as part of his campaign to force peasants into collective farms. Millions starved to death between 1932 and 1933 as the Soviet secret police emptied the countryside of grain and livestock.Jones' reporting was one of first attempts to bring the disaster to the world's attention."Famine Grips Russia — Millions Dying" read the front page of the New York Evening Post on March 29, 1933. "Famine on a colossal scale, impending death of millions from hunger, murderous terror ... this is the summary of Mr. Jones's firsthand observations," the paper said.As starvation and cannibalism spread across Ukraine, Soviet authorities exported more than a million tons of grain to the West, using the money to build factories and arm its military.Historians say that between 4 million and 5 million Ukrainians perished in what is sometimes referred to as the Great Famine.Walking from village to village, Jones recorded desperate Ukrainians scrambling for food, scribbling brief interviews in pencil on lined notebooks."They all had the same story: 'There is no bread — we haven't had bread for two months — a lot are dying,'" Jones wrote in one entry."We are the living dead," he quoted one peasant as saying.Jones' eyewitness account had little effect on world opinion at the time. Stalin's totalitarian regime tightly controlled the flow of information out of the U.S.S.R., and many Moscow-based foreign correspondents — some of whom had pro-Soviet sympathies — refused to believe Jones' reporting.The New York Times' Walter Duranty, a Pulitzer Prize-winning journalist, dismissed his article as a scare story."Conditions are bad, but there is no famine," Duranty wrote a few days after Jones' story was published. Other correspondents chimed in with public denials.With his colleagues against him, Jones was discredited.Eugene Lyons, an American wire agency reporter who gradually went from communist sympathizer to fierce critic of the Soviet regime, later acknowledged the role that fellow journalists had played in trying to destroy Jones' career."Jones must have been the most surprised human being alive when the facts he so painstakingly garnered from our mouths were snowed under by our denials," Lyons wrote in his 1937 autobiography, "Assignment in Utopia."Lyons' admission came too late for Jones, who was killed under murky circumstances while covering Japan's expansion into China in the run-up to World War II.British Prime Minister David Lloyd George, whom Jones had once served as an aide, said shortly after his death in 1935 that the intrepid journalist might have been killed because he "knew too much of what was going on.""I had always been afraid that he would take one risk too many."Jones' handwritten diaries are on display at the Wren Library at Trinity College in Cambridge, where he was a student, until mid-December.
Welsh journalist Gareth Jones snuck into Ukraine in March of 1933, at the height of an artificial famine engineered by Soviet dictator Josef Stalin as part of his campaign to force peasants into collective farms. Millions starved to death between 1932 and 1933 as the Soviet secret police emptied the countryside of grain and livestock.Jones' reporting was one of first attempts to bring the disaster to the world's attention."Famine Grips Russia — Millions Dying" read the front page of the New York Evening Post on March 29, 1933. "Famine on a colossal scale, impending death of millions from hunger, murderous terror ... this is the summary of Mr. Jones's firsthand observations," the paper said.As starvation and cannibalism spread across Ukraine, Soviet authorities exported more than a million tons of grain to the West, using the money to build factories and arm its military.Historians say that between 4 million and 5 million Ukrainians perished in what is sometimes referred to as the Great Famine.Walking from village to village, Jones recorded desperate Ukrainians scrambling for food, scribbling brief interviews in pencil on lined notebooks."They all had the same story: 'There is no bread — we haven't had bread for two months — a lot are dying,'" Jones wrote in one entry."We are the living dead," he quoted one peasant as saying.Jones' eyewitness account had little effect on world opinion at the time. Stalin's totalitarian regime tightly controlled the flow of information out of the U.S.S.R., and many Moscow-based foreign correspondents — some of whom had pro-Soviet sympathies — refused to believe Jones' reporting.The New York Times' Walter Duranty, a Pulitzer Prize-winning journalist, dismissed his article as a scare story."Conditions are bad, but there is no famine," Duranty wrote a few days after Jones' story was published. Other correspondents chimed in with public denials.With his colleagues against him, Jones was discredited.Eugene Lyons, an American wire agency reporter who gradually went from communist sympathizer to fierce critic of the Soviet regime, later acknowledged the role that fellow journalists had played in trying to destroy Jones' career."Jones must have been the most surprised human being alive when the facts he so painstakingly garnered from our mouths were snowed under by our denials," Lyons wrote in his 1937 autobiography, "Assignment in Utopia."Lyons' admission came too late for Jones, who was killed under murky circumstances while covering Japan's expansion into China in the run-up to World War II.British Prime Minister David Lloyd George, whom Jones had once served as an aide, said shortly after his death in 1935 that the intrepid journalist might have been killed because he "knew too much of what was going on.""I had always been afraid that he would take one risk too many."Jones' handwritten diaries are on display at the Wren Library at Trinity College in Cambridge, where he was a student, until mid-December.
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