Thursday, 30 October 2008

LSE slows Russia push --- Market turmoil, IPO drought curbs Moscow office plans

Wall Street Journal Europe
By Jason Corcoran in Moscow

30 October 2008

Moscow -- THE LONDON Stock Exchange Group PLC has dropped a plan to open an office in Moscow after the financial crisis wiped out the prospects for Russian stock issuance for at least 12 months.

The decision to call off the Moscow office was taken after a group of companies in Russia and the Commonwealth of Independent States pulled stock listings amid a plunge in stock markets. Until recently, Russia had been seen as a possible source of growth for the larger exchange, which is facing competition from new rivals.

Jon Edwards, director of CIS and Central and Eastern Europe at the LSE, said the exchange had given the green light for the opening of a Moscow office before the country's economic crisis began in August. "We pulled plans to open in Moscow when we realized the severity of the crisis," he said.

Russian public-affairs and media company PBN said capital-raising activity in the CIS had slumped in the third quarter to half of the level seen last year, and is now at its lowest level since 2004.

So far this year, there have been seven initial public offerings by companies in Russia, Kazakhstan and the Ukraine, raising $1.7 billion, according to PBN. "To date we know of 43 companies that postponed or pulled their flotations this year," said Peter Necarsulmer, PBN's chief executive.

"We are very aggressively focusing in Russia's regions for companies ready to hit the ground running for capital raising, which we hope will open 12 months rather than 18 months as is expected," Mr. Edwards said at the sidelines of an investor conference. He said he had recently returned from company visits in metals-and-mining town Novosibirsk in Siberia and oil town Khanty-Mansiysk in Russia's Far East.

Like many other large exchanges, the LSE is dealing with the effects of the economic downturn and rising competition. Revenue at Europe's main incumbent stock exchanges have come under pressure in recent months from falling stock markets and the emergence of low-cost rivals, such as Turquoise and Nasdaq OMX Europe.

According to the World Federation of Exchanges, the total value of shares traded at the LSE fell more sharply than at any other large European stock market in the year to September, although the LSE's trading volumes rose faster than its peers.

Faced with low-cost rivals and dwindling volume, the LSE is likely to cut the fees it charges traders by 10% over the coming year to maintain competitiveness, said Credit Suisse analyst Rupak Ghose in a research note released Wednesday.

A spokeswoman for the LSE declined to comment on potential fee cuts and said that the WFE figures were of limited interest because different exchanges take report trading figures differently.

(Copyright (c) 2008, Dow Jones & Company, Inc.)

Tuesday, 28 October 2008

VTB opens overseas offices

Financial News

Jason Corcoran in Moscow
28 October 2008

Russian state bank VTB is defying the global downturn and dismal domestic markets by opening new sales and representative offices for its investment banking arm in New York and Dubai.

Yulia Chupina, the VTB board member responsible for the expansion of its investment banking subsidiary, said the bank would open offices shortly in the US and Dubai.

She said: "We are being cost conscious by freezing hiring and development in some areas while continuing to develop in other areas."

VTB has already established three investment banking hubs in Moscow, London, and Singapore. It has dominated this year's hiring war in Russia by recruiting bankers from Deutsche Bank and key figures from a number of banks in Moscow.

In response to the crisis, the bank said it was considering cutting costs by between 15% and 20%, and had postponed a move into its new offices in Federation Tower, the tallest skyscraper in the emerging business district of Moscow City.

Chupina confirmed that VTB was no longer interested in buying a stake in Renaissance Capital's troubled consumer lending arm Renaissance Credit.

The bank is believed to have abandoned the deal after Renaissance Capital founder Stephen Jennings declined to cede control.

—Write to Jason Corcoran at

No crisis detox for DTEK

Business New Europe

Jason Corcoran in Moscow

October 28, 2008

The richest man in Ukraine and reputedly the whole of the former Soviet Union, Rinat Akhmetov, is embarking on a bold acquisition programme to pick up cheap energy assets across Central and Eastern Europe at a time when other oligarchs in the region are sweating over making margin calls.

Akhmetov, estimated by the Russian daily Kommersant to be worth $31.5bn, has largely been insulated from the international financial crisis due to the consistent demand for coal and electricity and his minimal exposure to the equity markets.

DTEK, Akhmetov's main Ukraine-based energy holding, is now talking to banks about assembling a cash pile to target coal assets worth up to $500m in Russia and the rest of Central and Eastern Europe. "We are pretty much immune to the fluctuations of the world economy and we are cash positive so we can fund our modernisation programme and our working capital through our own cash so we don't need to use the external market. We do need external markets only to fund M&A and refinance our debt," Yuriy Ryzhenkov, DTEK's chief financial officer, told bne in an interview.

Ryzhenkov said DTEK is looking to buy assets cheaply in the resource base in Russia close to Ukraine and westward in Poland, Romania and Hungary. "We are trying to balance our whole chain of production from coal mining to the end customer. We are also looking outside of Ukraine westwards for new customers and new generations in countries like Romania, Hungary and Poland. The assets there can have a synergy with existing assets in Ukraine," he said.

A bigger whole

Kyiv-headquartered DTEK is part of Ukraine's largest conglomerate Systems Capital Management (SCM) and is the leader in Ukraine's fuel energy industry. It runs the energy assets of Donetsk-based SCM and unites 16 enterprises, including Skhidenerho energy generating company, Service Invest and Enerhovuhillia energy distribution companies. DTEK is Ukraine's largest coal producer, owning the Pavlogradugol unit and the Donbass Komsomolets mine SHKD.PFT. It also owns electricity generator Vostokenergo and the electricity network Servis-Invest and PES-Energougol. According to 2007 figures, its market share in Ukrainian coal mining industry was 20.9%; its share in thermal power generation was 27.0%; and its market share in electricity distribution was 5.4%.

Last year, DTEK earned revenues equivalent to $1.86bn compared with $1.04bn in 2006, and operating profit more than doubled to almost $496m from $243m. Net profit rose to $196m from $102m.

Metinvest, Akhmetov's metals and mining holding is vertically integrated, with its energy needs met from DTEK. When markets improve, analysts expect both DTEK and Metinvest to move forward with their IPO plans and to provide an interesting cash-out to investors with a two- to three-year horizon.

Ryzhenkov said the ambitious $2bn capex programme of DTEK, which is wholly owned by Akhmetov and his wife, was also unaffected by the financial crisis. "The majority of it is addressed towards the coal mining assets. We are planning bringing the productivity of those assets up to the best western standards and that would put us in a stronger position against competitors outside of Ukraine. This programme is to be funded through our own cash flows. At the moment, DTEK is not paying dividends and all money generated is reinvested into existing assets."

With western banks offering unattractive terms for loans, Ryzhenkov said DTEK was looking at other avenues to fund its expansion programme such as bond issuance, syndicated loans with relationship banks and leasing transactions. Russian bank Troika Dialog has already underwritten two tranches worth UAH500m ($100m) on behalf of DTEK, but the company remains on hold, as they don't have a dire need to sell at current rates of 15-25% per annum. DTEK postponed the issuance of its debut Eurobond last year and is waiting for a window in the current market before opting for that financing route.

In recognition of DTEK's rude financial health, ratings agency Fitch in September placed the company on a positive outlook, although it did cite poor liquidity and a relatively short debt maturity profile as negatives. "We were quite pleased by the upgrade," commented Akhmetov. "We improved our financing metrics since last year when we first obtained the rating. At the same time as notching down the Ukraine rating outlook to negative, they changed our outlook to positive which was a good sign that we are doing something right and the agency considers us becoming more stable and self-sufficient."

Akhmetov has been a very divisive figure in Ukrainian politics thanks to his own political ambitions and close ties to Viktor Yanukovych, the twice-elected prime minister and leader of the opposition Party of the Regions. But Ryzhenkov insists that the negative press hasn't impeded the progress of the company. "Obviously, the company gets associated with the beneficial shareholder whenever we do something." However, he insists that while DTEK did indeed grow during the time the Party of Regions was in government, the company also prospered when President Viktor Yushchenko's party and Prime Minister Yulia Tymoshenko's eponymous bloc were in power too. "I can say the company is pretty much immune towards the political landscape," he said.

Even so, the latest round of political wrangling, which forced snap elections to be called for December, has had some effect, by slowing the progress of privatisation in the electricity generation sector. However, DTEK is optimistic the New Year will bring developments.

Thursday, 16 October 2008

Oligarchs make the most of Russian M&A activity

Financial News

Jason Corcoran in Moscow 13 October 2008

Many holdings are up for sale

Oligarchs on opposing sides of the cash crisis are set to trigger a boom in merger and acquisition activity in Russia and the Commonwealth of Independent States.

Cash-tight tycoons are being forced to sell holdings to meet pending margin calls while their rouble-wealthy counterparts are sizing up distressed assets affected by the liquidity crunch.

Oligarch Oleg Deripaska had to sell a stake in Canadian auto parts maker Magna to meet a $1bn (€734m) margin call while Ukrainian billionaire Kostyantin Zhevago was forced to sell a large stake in Swiss-based ore miner Ferrexpo worth $180 in order to meet a margin call by JP Morgan.

Analysts are predicting Deripaska, who has $28bn, may have to divest further holdings in his Basic Element investment vehicle to shore up his finances.

Marat Gabitov, a Moscow analyst at UniCredit, said: “We see the news as further confirmation that the global financial crisis may be worse than we previously deemed. We also see risks for other public names in which Deripaska controls significant minority stakes – Strabag, Hochtief and GM, of which we know that Strabag was financed with a bank loan.”

Oligarchs with limited equity exposure are looking to pounce on distressed assets in Russia and the Commonwealth of Independent States. Rinat Akhmetov, the wealthiest man in Europe and Russia with an estimated fortune of $31.1bn, is putting together a war chest to fund an acquisition programme of coal assets worth between $50m and $500m in Russia, Ukraine and other parts of eastern Europe.

Yuriy Ryzhenkov, chief financial officer of Akhmetov’s main Ukraine-based energy holding company DTEK told Financial News: “We are now looking outside Ukraine, having focussed ourselves domestically until recently.

Now, we are looking at the resource base in Russia, especially regions close to Ukraine due to logistical reasons. We are also looking outside Ukraine westwards for new customers and new generations in Romania, Hungary and Poland. The assets there can have a synergy with existing assets in Ukraine.”

Ryzhenkov said DTEK would like to buy assets cheaply and then turn them round. He said: “We have some core abilities to turn distressed assets round and it is our experience in Ukraine and especially in coalmining to work on geologically difficult assets.”

Stephen Jennings, chief executive of Renaissance Capital, is forecasting an M&A boom for his brokerage as Russian and CIS businessmen are forced to sell to those with liquidity.

He said: “Consolidation in finance, for instance among banks, brokers and asset managers, will be extraordinary.”

Jennings last month sold half his business to oligarch Mikhail Prokhorov’s Onexim investment fund for $500m, even though Renaissance had been valued by bankers at $3bn to $4bn a year ago when VTB Bank made its approach.

The Wall Street Journal revealed that Dutch bank Fortis had appealed directly to billionaire Suleiman Kerimov’s Millennium Fund during the summer for a €400m ($546m) cash injection in the context of a share issue.

Swiss-based Millennium Fund already owns about 2% of Fortis shares along with stakes in US investment bank Morgan Stanley, Swiss bank Credit Suisse and Deutsche Bank of Germany, according to the Wall Street Journal.

Analysts are predicting Kerimov might return his attention to Russia having sold down his stakes in blue chips before the downturn. Oligarchs exposed to Russia’s property and construction sectors are already offloading assets and freezing developments as the country’s real estate bubble shows signs of bursting.

Ratings agency Fitch said reports that Sistema-Hals is likely to sell almost a quarter of its projects to raise up to $500m of cash and that developer Mirax is likely to undertake something similar highlight a deterioration in the funding environment for developers.

Sistema-Hals is the listed property arm of conglomerate Sistema, headed by oligarch Vladimir Evtushenkov, while Mirax is owned by billionaire Sergei Polonsky.

Mirax, Sistema-Hals and Inteko headed by Russia’s wealthiest woman Yelena Baturina have already announced project freezes over the next year, according to reports in the Russian press.

Liquidity problems have extended to Russia’s consumer sector.

Yevgeny Chichvarkin, chairman of Russia’ largest mobile phone retailer Euroset, said he had sold his company for “a few kopeks” to billionaire Alexander Mamut after being unable to find a bank to refinance its debt.

Mamut’s investment company ANN may have used some of those proceeds from his sale of a 38% stake in insurer Ingosstrakh to Czech investment firm PPF for €600m to acquire 100% of Euroset for $400m.

State banks such as VTB are also planning to capitalise on assets trading at distressed levels then resell them later for a profit. VTB chief executive Andrei Kostin told a Reuters summit in September that the bank is accumulating a “cash fist” to potentially buy stakes in businesses.

Russian banking, consumer and real estate sectors were mentioned, as well as banking assets abroad. Some oligarchs and billionaires had the prescience or good fortune to offload large stakes in Russian blue chips before the market slide, which has wiped 60% of the value of the domestic equity markets since late July. Tycoons were encourage to buy into “People’s IPOs” by the Kremlin in the past couple of years, including Rosneft, Sberbank and VTB.

One Moscow trader said: “Some oligarchs sold out after a year of these major listings. They locked in some profit and got out but others have been hurt.”

Baturina almost halved her stake in state savings bank Sberbank from 0.68% to 0.38% after the shares lost half their value during the second quarter this year.

Baturina, who has an estimated fortune of $4bn, initially bought into Sberbank last year following the bank’s IPO.

Her equity fund Kontinental’s proceeds from securities sold in the second quarter came to 5.4bn roubles (€151m), according to the fund’s financial statement.

Kerimov, who owns Nafta Moskva oil refinery, is reported in the Russian press to have sold down his 6% stake in Sberbank and 4.5% stake in energy group Gazprom.

Kerimov has also sold stakes in silver producer Polymetal for around $2bn, in a construction project for $3.5bn and in NTK cable TV operator for another $1.5bn.

Filaret Galchev, owner of Russia’s largest cement producer Eurocement, has cut his stake in Sberbank to 1.85% from 3%. Galchev has since acquired a 6% stake in Swiss cement group Holcim.

Recruiters are reporting a growing trend by oligarchs to hire seasoned fund managers and bankers from investment firms and banks as they increased their private equity-style investment funds.

Millhouse, the investment vehicle of Russian oligarch Roman Abramovich, hired the general director of MDM Bank’s MDM Asset Management in July to run its portfolio of investments while Prokorov’s main strategist and head of Onexim is Dmitry Razumov, a former banker at Renaissance Capital.

Sunday, 12 October 2008

EU monitors in Georgia confirm Russian withdrawal

The Irish Times


Saturday, October 11, 2008

EU MONITORS in Georgia have confirmed that Russian forces have dismantled 17 checkpoints, one signals post and one military base in zones adjacent to breakaway regions Abkhazia and South Ossetia.

But, while EU foreign policy chief Javier Solana said yesterday Russian troops have completed their withdrawal from the areas in line with yesterday's deadline,French foreign minister Bernard Kouchner complained that Russia still occupies three disputed pockets of land - Akhalgori and Perevi in South Ossetia, and the Kodori Gorge in Abkhazia - areas that were under Georgian control before hostilities broke out.

Col Dorcha Lee, a former army officer and veteran of UN peacekeeping missions in Lebanon, the Middle East and Serbia who heads the Irish group in the 200-strong European Union Monitoring Mission (EUMM) admits that their work is difficult and breaking new ground. "This is a new experience for the EU and we are hyper-sensitive to its needs and to succeed here. We hope to use this as a future model for conflicts if it works. It's a question of confidence-building so refugees can feel safe returning home and our presence is vital in that respect."

The other members of the Irish group are Peter McMahon, a former Air Corp lieutenant colonel, Peter Emerson, a Russian speaker and lecturer in consensus politics, and Eithne MacDermott, a East European studies specialist.

The Irish peacekeepers have travelled on patrol in armoured vehicles up the eastern side of the South Ossetian buffer zone from their field office at Bazaleti.

The EUMM is scheduled to last a year and the Irish representatives are on a four-month stint.

EU monitors began witnessing Russian troops bulldozing checkpoints and withdrawing since earlier this week.

The Irish group were visited by the Irish Ambassador to Georgia, Geoffrey Keating, who also saw the main refugee camp in Gori where 3,000 displaced citizens are waiting to return home. He witnessed the delivery of food donations organised by Irish expat Dr Mike McCarthy and local Irish businessmen.

Mr Keating, also Ambassador to Bulgaria, is based in Sofia. Overall, the Irish people and Government have contributed €250,000 in humanitarian assistance following the recent conflict. "People are now very anxious to get back to their homes and villages and start rebuilding their lives, but they are fearful of militias in both regions," said Dr McCarthy who runs an international medical service from the Georgian capital Tbilisi.

Monday, 6 October 2008

Moscow needs more reforms

The Guardian

Jason Corcoran - Friday October 3, 2008

Comment is Free
Russia may have plentiful foreign currency reserves, but it is one of the biggest losers from the credit crunch

All comments (33)

Invstor panic following Russia's default on its sovereign debt in 1998 led to a stampede by foreign investors to Moscow's Sheremetyevo airport and ultimately delayed the country's integration into the global economy.

Wind the clocks forward a decade and Russia is again in the grips of a deepening financial crisis precipitated by the US banking collapse.

Ten years ago, millions of Russians had their savings wiped out and many of the leading banks disappeared. The government fell on its sword, accepted culpability and went cap in hand to the International Monetary Fund and World Bank.

Today, there are no queues around the block to empty deposit accounts and life is carrying on per usual, apart from grumbles about rising inflation hitting the cost of bread and other staples.

The government is in a different position too as it squats upon $574bn (£325bn) of foreign currency reserves and $175bn in two oil stabilization funds.

Yet Russia has been one of the biggest losers in global markets this summer with stock indices tumbling by over 50% and capital flight leading to an exodus of $57bn since August 8. A rapidly deteriorating financing environment is now showing signs of pricking Moscow's hot property bubble.

This frustration led prime minister Putin on Wednesday to blame US "irresponsibility" for failing to deal with the financial crisis affecting the global economy.

Putin is partly right pinning the blame on the US but can't attribute all of his country's economic woes to the captains of Wall Street. Russian markets have been pistol-whipped by the international credit crisis but also domestically by its five-day war in Georgia, Russo-centric
corpoate flare-ups and Putin's own allegations of price-fixing at miner Mechel.

Putin's outburst at a cabinet meeting reflects the frustration of Russian businessmen who see a disconnect between the financial markets and the fundamentals.

Russia has a growth rate of 7.6%, a huge current account surplus, a budget surplus from high commodity prices and a booming consumer sector.

Yet domestic stock markets have spiralled downwards and lurched wildly out of synch with global trends. The regulator has had to step in three times during the past fortnight to suspend trading on both Moscow's exchanges.

Putin has responded to the crisis by pledging $150bn of funds to shore up confidence in the banks while the central bank said it would provide loans without collateral.

The credit squeeze has already led Russia's largest broker Renaissance Capital to sell 50% of its shares to billionaire oligarch Mikhail Prokhorov while KIT Finance has ended up in the clutches of Leader, energy giant Gazprom's pension fund manager.

More emergency sales and collapses are likely but a systemic failure of 1998 proportions is out of the question.

While the credibility of transforming Moscow into a financial hub to rival London, New York or Frankfurt has been dented by recent trials and tribulations, it could provide the wake-up call for wholesale reform of institutions and pensions needed to match that ambition.

Selected comments

Oct 03 08, 3:12pm
Things are naturally in a state of flux, but significant changes were always gong to be necessary, and I think the likes of Medvedev and Putin probably acknowledge that fact.

Clip | Link andrewwiseman
Oct 03 08, 3:41pm
"One of the biggest losers from the credit crunch"

"Russia has a growth rate of 7.6%, a huge current account surplus, a budget surplus from high commodity prices and a booming consumer sector."

We should have their problems.

Still, their tanks are probably made of cardboard, right?

Oct 03 08, 5:04pm
Some Russia's problems probably come from trying to copy verbatim rotten western financial institutions and procedures, like stock exchanges and banking. The less Russians participate in stupid Western gambling games and schemes the better it is for Russia, I think. But Russian state development programs look pretty solid at the moment. If things going according to their plans, by 2020 Russia is going to catch up with or overtake EU/US in most areas and improve its infrastructures dramatically. At the same time the West might be getting sucked into a black hole of its own creation (with or without the collider) ;-)

Oct 03 08, 5:21pm
"While the credibility of transforming Moscow into a financial hub to rival London, New York or Frankfurt has been dented by recent trials and tribulations, it could provide the wake-up call for wholesale reform of institutions and pensions needed to match that ambition."

Yeah, maybe they should go for wholesale deregulation and the mass securitisation of dodgy loans like we did.

It's worked a real treat and has only cost the American tax payer $1trillion, with another $1trillion on the way, and the UK taxpayer £350bn, so far.

Recommend? (10)
Report abuse
Clip | Link UralMan
Oct 03 08, 5:41pm
I would not pay attention to the stock market in the short term. On a larger scale, the Russian market does not look terribly bad, compared, say, to the US. As of now, the Dow Jones trades at 10700. The first time it crossed this level was in April 1999, nearly 10 years ago. The Russian main stock index (RTS$) finished today at 1070, the fist time it reached this level on its way up was in December 2005. Sure, it fell more from its top recently and is more volatile than Dow Jones, but that what you would expect from an emerging market, wouldn't you? Especially for such an overheat economy as Russian one. By the way, about the stock market fall: the RTS$ fell by 57% from its top. Incidentally, the Chinese main stock market fell by nearly 70% from its top. Inconveniently for the author, China has not been involved in any war that can be blamed on :-)

There is very good technical reason for the market collapse in Russia. Practically all the entities in Russia have been borrowing money from banks on a short term notice by pledging shares as collateral. They did not bother thinking of saving money for repaying these loans as, having used to the idea that shares can only go up, meant to sell their collateral at higher prices to repay the loans. Once the market went downturn and banks started to call the borrowers (since the value of collateral in their coffers dropped), the latter started scratching around for cash at any cost, selling any shares they had, further accelerating the fall. The market caught itself in a vicious circle. Everybody knows that the share "A" is intrinsically worth at least $100, but the holder is dumping it at $10 not because he thinks that the company is bad, but because he must repay money to the credit right now. In short, the free market is at work. The initial trigger for this is the loss of confidence in the banking sector and is, indeed, originated from the US. I bet, people in Britain witnessing nationalisation of their banks have similar view. So, do not blame Putin for that.

When it will stop? Who knows. If I knew such things, I would long be the owner of Guardian (I like this paper) rather then its reader. But, what I do know, is that once the technicality sorts itself out and the panic is over, the Russian market will quickly rebound, as many companies remain fundamentally very strong and have net assets well in excess of the value suggested by the shares. And when it happens, I would be extremely interested to read what Jason Corcoran's explanation for that would be :-)

Russian billionaires hit by property slump

Wealth Bulletin

3 October 2008 - Jason Corcoran in Moscow

Russian billionaire owners of real estate developers are likely to be among the worst-hit as a deteriorating financing environment pricks a bubble in Moscow's hot property market.

Ratings agency Fitch said Russian developers were dangerously exposed to the crisis because of a large share of short-term debt in their liquidity profiles, significant operational cash outflows as well as limited cash-on-balance sheet

Fitch said reports that Sistema-Hals is likely to sell almost a quarter of its projects to raise up to $500m of cash and that Mirax is likely to undertake something similar highlight a real deterioration in the funding environment for Russian developers.

Sistema Hals is the listed property arm of the conglomerate Sistema, headed by oligarch Vladimir Evtushenkov, while Mirax is owned by billionaire Sergei Polonsky.

Mirax, Sistema Hals and Inteko headed by Russia's richest woman Yelena Baturina has already announced freezes on new and ongoing projects over the next year, according to reports in the Russian press.

Sistema-Hals is planning to sell nearly one-quarter of its development assets to shore up accounts and repay debts, which currently total $1.2bn, or 34% of the value, according to Kommersant.

Julian Crush, senior director at Fitch said: "At a time when the Russian government has had to intervene to support domestic financial institutions and with increasing question marks over the ability and appetite of all but the largest Russian domestic banks to maintain current funding levels to the real estate sector, liquidity risks associated with Russian property developers have never been higher."

Open Investment, Russia's second largest listed developer, has fallen by 52% this year while LSR Group, the Russian developer and building-materials maker controlled by billionaire Andrei Molchanov, has dropped by 64%.

Much focus has been on PIK where Kirill Pisarev and Yuri Zhukov, the main executives at listed property developer PIK have registered paper losses of over $2.2bn each, according to US publication Forbes. PIK's share price has fallen by 78% since its IPO in June 2007.

In its latest results announcement on Tuesday, PIK said it is due to repay $900m over the next six months and it will use $400m of its own cash and $200m from banks but still needs to find $300m.

However, analyst Barry Schumaker at UralSib, sounded a note of optimism for PIK's outlook.

In a note, Schumaker said: "PIK's four-month 90% share price collapse is undeserved and is related to the company's short-term liquidity issue and expectations of a weakening residential market. We reiterate our Buy recommendation and target price of $33/share."

Russia's richest man Oleg Deripaska, with Forbes estimated fortune of $16bn, has much of his money tied up in property and construction interests, such as the emerging business district of Moscow City, along with stakes in Austrian builder Strabag and Canadian auto-parts maker Magna, which he is selling to creditors.

A report in the Daily Telegraph on Wednesday said the oligarch had sacked all his domestic staff in his vast Moscow estate last week and replaced them with cheap labour from a provincial town.

The same report cited Alexander Lebedev – one of Russia’s richest men – who admitted to having lost two thirds of his £1.7bn fortune since the market crisis commenced.