Samedi 4 octobre 2008
6
04
/10
/2008
16:10
Divestment in Auto-Parts Maker Shows How Financial Turmoil, Stock Free Fall Hit the Country's Wealthy Power Brokers
MOSCOW -- One of Russia's billionaire tycoons, Oleg Deripaska, gave up a showcase Western acquisition to creditors, in the first public example of how the global
credit crisis is squeezing some of the country's wealthiest and most powerful men.
Mr. Deripaska, who controls aluminum giant UC Rusal and auto company OAO Gaz, has holdings that span energy, construction and banking. On Friday, his holding
company confirmed turning over to creditors his 20% stake in the Canadian auto-parts maker Magna International Inc.
A year ago, he announced a strategic partnership with Magna and bought the stake for $1.4 billion, using loans collateralized by the shares to fund the deal. But
the shares have fallen in value because of weakness in the global auto industry.
The move came as Russian share prices dropped sharply Friday despite a nearly $200 billion Kremlin rescue package. Battered by falling oil prices and global
instability, Russia's dollar-denominated RTS index fell 7.1%. It closed just above the lows seen in mid-September, when spiraling declines led the authorities to shut the markets for more than
two days as they hammered out the bailout plan.
Bankers and analysts say that like in many Western countries, the massive injections of cash into the banking system aren't being lent out into the rest of the
economy because of persistent fears about widening credit problems. As a result, Russia's once-torrid growth is beginning to sputter. Curtailed lending has cut into booming auto sales and
mortgages and starved businesses of credit.
Local and foreign companies have bet heavily on continued growth in Russia, and the Kremlin depends on rising living standards for public support. In recent years,
Russia's biggest companies and banks, some controlled by its billionaire tycoons, have grown dependent on low-cost funding from overseas, running up almost $500 billion in foreign debt.
"These guys are leveraged in every place they can be leveraged," said one senior Western banker. Many, like Mr. Deripaska, used their equity stakes as collateral
for loans. As the value of those stakes has dropped, creditors have demanded more cash or equity. New loans have become much harder to get.
Konstantin Panin, a spokesman for Basic Element, Mr. Deripaska's holding company, said in an email that turning over the Magna shares "is not a sign of financial
distress."
"Like all other companies, we are not immune from the crisis," he said. "The current overall level of debt is acceptable, but we are of course working to optimize
the credit portfolio," he added, declining to elaborate. Erik Eberhardson, head of the auto unit in Mr. Deripaska's empire, said the company decided to focus on the Russia market and that
cooperation with Magna there will continue. Rusal, Mr. Deripaska's aluminum company, with $14 billion in debt, says it hasn't faced margin calls or other financial problems.
One of Russia's wealthiest men, Mr. Deripaska has been dogged by lawsuits from former partners alleging he cheated them out of their stakes, charges he vehemently
denies. The U.S. government has canceled his entry visa because of its concern about alleged links to criminal activity, which he also denies.
Mr. Deripaska's isn't the only Russian company to feel the chill in the global markets. State oil company OAO Rosneft was hit with margin calls last month on a
$2.35 billion loan it had negotiated in July, secured with its own stock. Rosneft's shares are down over 50% since July, and the company had to contribute hundreds of millions in cash and
additional shares to rebuild its collateral, according to people familiar with the situation.
Part of the Kremlin's $200 billion rescue plan is $50 billion offered to Russian companies to refinance foreign loans with a state-owned bank, but at painfully high
interest rates. That program, as well as other parts of the rescue plan, are expected to be approved by parliament next week.
But for the moment, credit has tightened sharply, hurting companies and consumers, bankers and analysts say. Auto sales, about half of which are done on credit,
slowed sharply in August and September, running well below the 50% annual growth seen in previous months, according to industry officials.
"The party's over," said Mr. Eberhardson. "This is a time in which a lot of people are going to have problems."
SOURCE : Wall Street Journal – Oct 4, 2008
By GREGORY L.WHITE
