Sunday, 23 August 2009

Deal-hungry RenCap wins mandate for Sistema issue

Financial News

Jason Corcoran in Moscow

18 August 2009

Russia’s Renaissance Capital has been appointed as lead manager and bookrunner for a 20bn rouble bond (€441m) by conglomerate Sistema, capping a string of deals worth over $2bn (€1.4bn) that the bank has worked on in the past few weeks.

The Sistema rouble bond is the biggest of the year and beats the recent 15bn rouble issue by Russia’s biggest lender Gazprom.

The seven-year bond, which will be issued via a Dutch auction on Tuesday, will be used to refinance foreign debt owed by Sistema.

The other deals won by Renaissance mark a new entry into new markets in Poland, Zambia, Sierra Leone, as well as the convertible bonds sector.

Renaissance was a co-lead manager on a follow-on $200m public offering by Polish vodka producer CEDC on July 20. The deal was four times over-subscribed and pricing was close to the market.

On July 29, RenCap priced a combined $300m equity and convertible bond issue for Zhaikmunai, a Kazakh oil and gas company. It was the first convertible bond structured and priced by Renaissance and the first convertible offering structured and led by a Russian bank.

Renaissance acted as sole bookrunner on a follow-on offering for AIM-listed African Minerals that raised $105.5m. The placing raised growth capital to finance the company’s drilling campaign at an iron ore project in Sierra Leone.

The transaction is the only second equity offering to have priced at a premium in EMEA this year.

Current deals include a $49m rights issue by Zambia Sugar which would become the bank’s third African capital markets transaction this year.

The sting of fixed income mandate wins follow tthe recruitment of Yury Gruzglin from Deutsche Bank last October to run the debt product group.

Renaissance, which was forced to pare back its staff by 40% following the banking crisis, has recently started hiring again and has raised salaries to pre-crisis levels.

Russian banking carousel spins once more

Financial News

Jason Corcoran

17 August 2009
Letter from Moscow

The great purge in Moscow’s banking sector is over. Pay and staff were cut to the bone, but wages are now back to near pre-crisis levels, with annual guarantees of $2m to $3m ensuring that the hiring carousel is back in action.

Russian markets have rallied a year after being pistol-whipped by the international credit crunch, and roiled by a five-day war in Georgia, a domestic banking crisis and a series of investor scandals.
Russia’s RTS and Micex stock exchanges have won back trading lost to the London Stock Exchange and have recovered from their 80% plunge in value.

The upheaval caused by the market’s meltdown resulted in the effective nationalisation of brokerage KIT Finance and mid-tier lenders Globex and Svyaz Bank. Renaissance Capital was forced to accept a $500m investment last September from billionaire Mikhail Prokhorov in return for the sale of a 50% holding while Troika Dialog sold a 30% stake to South Africa’s Standard Bank.

RenCap, once the standard-bearer for Russian investment banking, slashed its staff by about half, and Troika by 35%.

Western banks, which had built aggressively in Moscow since 2007, were also forced to retrench as equity and credit markets shrivelled.

RenCap is hiring for selective areas and has increased salaries in Moscow by 20% and in London by 10%, which returns most surviving staff’s pay to pre-crisis levels. Deutsche Bank, the largest foreign investment bank in Russia, said it had never cut wages and had raised them in some departments by 15% to 20% from July 1.

As dealmaking has returned in oil and gas and in pockets elsewhere, owners and country heads are starting to worry about hanging on to their best people. Credit Suisse has fought to retain its sales staff in Moscow after an attempted raid by Goldman Sachs.

The Swiss bank was forced to authorise $2m guarantees after Goldman tried to swoop, according to a source close to the matter.

Goldman, which has struggled to break into the top five in any of the Russian league tables, has been linked with a move for several of Moscow’s best-known rainmakers.

The rumour mill went into overdrive this month after Alfa Bank’s Edward Kaufman had lunch with Chris Barter, co-chief executive of Goldman Sachs in Russia. Kaufman insists the issue never came up and that he is happy to stay at Alfa, where he is taking charge of “a revenue opportunity” to merge the group’s investment bank and the corporate bank. He said its fixed-income and equities divisions had recorded their best two quarters and corporate finance deals were growing rapidly.

At the height of the war on talent in 2007, Kaufman gained notoriety after being hired from UBS for a reputed $15m over two years. Sources close to Alfa suggest Kaufman has in the past few weeks signed a new two-year contract that is more lucrative than the original package.

Goldman is not the only outsider looking to land a senior banker to break into Russian dealmaking. Merrill Lynch has hired a co-head for its global market team in Russia from MDM Bank and is rumoured to be close to be bringing a head trader on board.

Barclays Capital is understood to be whittling down a short list of top bankers to head its expanded business in Moscow.

Swiss bank UBS is close to naming senior hires for investment and private banking while state-controlled VTB Capital continues its build-out into equities following its startling progress this year in debt capital markets.

One leading headhunter said: “The merry-go-round of hiring is back on. It won’t be as dizzy as 2007, but we have more work than we can handle and we are having to partner with other firms.”

Russia's Alfa to merge banking units

Financial News

Jason Corcoran in Moscow

10 August 2009

Russia’s Alfa Bank, is merging its investment banking and corporate banking businesses into one division in a move it believes is a "revenue opportunity".

The new unit will be aimed at increasing Alfa’s ability to sell products ranging from loans to advice on takeovers to its 40,000 plus corporate clients. The move mirrors a decision taken by Citigroup in the aftermath of last year’s financial crisis.

Ed Kaufman, co-head of corporate and investment banking at Alfa Bank, said: “It’s not a cost issue but a revenue opportunity. The client managers on the corporate banking side will be put together with the corporate finance team to offer the best products to our clients.”

Kaufman dismissed rumours among Russian bankers that the group was closing its investment bank and said it had just posted its best two quarters. “There were a lot of trading opportunities in fixed income where we invested heavily and booked the profits. We have also done well in equities and made more money from making educated bets.”

Kaufman and Vladimir Tatarchuk, head of corporate banking, will co-lead the combined division.

Alfa, which is controlled by the billionaire Mikhail Fridman, employs 135 in its investment bank and 600 in its corporate bank. The group has already downsized in many areas of corporate and investment banking over the last year. “We would look to see how markets develop if there needs to be reductions or additions in any specific areas but there are no layoffs due to the merger,” Kaufman said.

The bank insisted there would be no conflict of interest resulting from combining the two businesses.
Kaufman added: “We do not believe that corporate bank relationship managers will be able to sell M&A or corporate finance products but they are a key part of the coverage model and will be trained to understand the products and also to know when they need to bring in product specialist.”

The president of Alfa Bank, Pyotr Aven, has been one of the most bearish commentators on the prospects for bad loans in Russia’s banking sector. Aven has warned that the country's banks' non-performing loans could rise to 30% of assets, from an estimated 10% today.

Alfa hit headlines in March this year when it clashed with the oligarch Oleg Deripaska in a bid to protect itself against the possible default of a $1bn (€780m) loan. It comes as Deripaska faces a struggle to restructure his outstanding debt to other creditors.

Bloomberg reported on July 31 that Deripaska’s Basic Element unit is close to agreeing with Alfa on revising terms of $800m in debt.

Sunday, 9 August 2009

Russian banks back on the hunt for talent

Financial News

Jason Corcoran in Moscow
31 Jul 2009

VTB Capital and Troika Dialog have both boosted their equity sales and trading desks as recruiters report a summer uptick in hiring by Moscow-based investment banks.

State-controlled VTB has hired Vlad Markovskiy from UBS and Denis Gorvat from ING for its equity trading operation.

The bank, which launched just over a year ago, wants to build on its success in debt capital markets by building out an equity brokerage. VTB is ranked number two in the league table of arrangers of Eurobonds in the Russia and Commonwealth of Independent States debt capital markets for the first six months of 2009, according to data provider CBonds.

Separately, domestic peer Troika has hired Jim Bevan and Marcus Martin in London to replace a sales and trading team that quit for VTB in June. Both join from Nomura International in London.

The pair, will replace Will Lynch, Peter Walker and Richard Phillips who left to join VTB’s growing presence in London, one of its three global hubs.

VTB and Troika are the latest hires from banks in Moscow, where recruitment is beginning to pick up, according to headhunters.

Taras Rybak, a managing partner at headhunters Brain Source, said: “The hiring freeze at the bulge brackets and the Russian banks in Moscow ended several months ago. Most banks are looking to hire selectively now that the domestic recovery has spread from M&A and the equity markets to the debt capital markets.”

Bank of America Merrill Lynch last week recruited Sergey Babayan from Russian bank MDM as managing director and co-head of the bank’s global markets team in Moscow. Russian brokerages Aton Captial and Otrkritie have been also hiring.

The relaunched investment banking business of Aton has hired Ivan Nikolaev and Maxim Kabanov as a senior analyst and vice president of equity and fixed income sales, respectively. Both had previously been employed by Renaissance Capital.

Otrkrite has also tapped a former Rencap employee having hired George Zarya as senior sales executive for DMA (direct market access), which allows buy-side institutions to access liquidity venues without having to go through an execution desk. Zarya had been at Rencap for over three years working on international DMA sales until a month ago.

Ashmore opens in Japan and China

Financial News

Jason Corcoran in Moscow

27 July 2009
Emerging markets fund specialist Ashmore Investment Management is expanding by opening offices in China and Japan.

A source close to Ashmore said it was already recruiting for an operation in China and for a sales office in Japan. Ashmore is also expected to start working in Russia at the end of this year or in early 2010, the source said.

Ashmore, which manages about $25bn (€18bn), last year opened operations in Brazil and Turkey in a bid to increase its local presence in emerging markets, to raise more capital and to add more country-focused funds.

In 2007, Ashmore entered into a joint venture with private equity firm Alchemy Partners to invest in distressed debt and special opportunities in India.

Jerome Booth, head of research at Ashmore, declined to comment on specific geographical expansion plans. He said: “Our overall objective is underpinned on the need to grow and so far a lot of that has been organic in Brazil, Turkey and India. It’s a natural extension to build on further.”

Ashmore, which has traditionally raised most of its capital from US and European institutional investors, is attempting to raise money in emerging markets. Booth added: “We already manage money for central banks and sovereign wealth funds but eventually hope to manage funds for small investors in emerging markets.”

Ashmore has strong links with several sovereign wealth funds, with 15% of its assets under management coming from government institutions.

Booth said Asia sovereign funds, scarred by investing in western investment banks, were taking a fresh look at emerging markets.

Norway’s $370bn state pension fund, one of the world’s largest sovereign wealth funds, earlier this year increased its exposure to Russia by two and a half times and hired Prosperity Capital to run a country mandate. Norges Bank, the wealth fund’s manager, also wants to raise the emerging market weighting in its benchmark portfolio to 10% from 5%.

Banks press Russian authorities for market reforms

Financial News

Jason Corcoran in Moscow
27 July 2009

International custodians headed by Dutch bank ING are forming a lobby group to pressurise the Russian financial regulator and the Government to improve the market’s infrastructure.

The mission of the International Custodians League is to address regulatory and infrastructural market issues in the interests of local and international investors and their global custodians and sub-custodians.

In a policy paper, ING described the Russian securities market as “fragmented, decentralised, non-standardised and inefficient”.

It added: “There are many legal deficiencies and white spots in the securities, tax and corporate legislation that prevent many local and international investors from entering the Russian securities market or make their investments quite costly and cumbersome.”

Natalia Sidorova, head of securities service of ING Wholesale Banking in Moscow, said the main international custodians in Russia had been approached about joining the group.

Sidorova said: “We want to have an informal working group with other Russian custodians who are well aware of best international practices and foreign clients’ concerns with regard to the deficiencies of the Russian securities market infrastructure towards its development. In particular, such development would entail creation of a centralised system of handling of securities.”

A main goal of the group is to push for the creation of a central depository, an issue that has dogged the Russian market for almost a decade.

The Government has put forward several plans to create a central depository, but the politics of choosing one depository to form the base of the single company have been a stumbling block.

The National Depository Centre, Micex’s settlement depository and the Depository Clearing Company, the depository of the rival RTS exchange, continue to compete to be the central clearing company.

The league also wants the authorities to look at the issue of legal recognition of foreign nominee concept, setting up internationally recognised standards in the interaction between custodians and registrars, recognition of non-true legal entities, of partial and split voting and tax pre-clearance.

Custodians blame politics and bureaucracy for the slow pace of reform in the Russian securities market. To bring about change, they believe custodians and investors with similar interests must be heard as one voice.

However, Russia’s custody industry is fragmented and it remains to be seen if it can unite.

A spokeswoman for UniCredit, one of the leading sub-custodians in the Russian market through its ownership of International Moscow Bank, dampened enthusiasm for the initiative.

She said: “UniCredit managers are represented in the boards of various bodies that control the stock market. Though currently we do not yet have a clear picture what this new initiative will be aiming at, it remains to be seen if there is room for a privately organised custody lobby of such a format.”

Founder departs top-performing Russia hedge fund

Financial News

Jason Corcoran in Moscow
17 July 2009

Dmitry Kryukov, the co-founder of one of the best long-term performing hedge funds operating in Russia and the former Soviet Union, has left to pursue other projects.

Kazimir Partners, a hedge fund firm with offices in Moscow, London, New York and Baku, was set up by Frank Mosier and Kryukov in 2002 after the pair left the investment bank Renaissance Capital.

Kazimir declined to comment on Kryukov’s departure but a source close to the firm said: “Dmitry wanted to spend more time with his family and to explore other projects. We have a large and deep team so it shouldn’t have any impact on the business.”

The fund was one of one of the few hedge funds to focus on Russia and the former Soviet Union. Its flagship long/short fund, Kazimir Russia, shot up by more than 650% in five years from its inception in 2002.

The Kazimir Russia fund maintained a top ranking amid last year's banking crisis. The fund was rated third in a peer group of 40 Russian and regional investment vehicles for the year to November 28, according to Bloomberg charts.

In 2005, Kazimir acquired the funds business of investment bank Brunswick Capital, which was disposing of assets after entering into a joint venture with Swiss bank UBS.

A number of hedge funds operating in Russia and the former Soviet Union were forced to close or restructure earlier this year following a collapse in the region's equity markets and subsequent client withdrawals.

However, a Kazimir source said the group had not needed to restructure nor seek additional capital.

Kazimir has a Caspian fund which invests in the frontier markets of Kazakhstan, Azerbaijan and Turkmenistan. Sources close to the firm said the fund had exited positions in Kazakhstan before the country’s banking and construction sectors collapsed.

Kazimir, which has mainly institutional clients, declined to provide its current assets under management which are believed to have been about $1bn (€708,462) a year ago.

Third Senior Banker Leaves Troika Dialog Brokerage



July 17, 2009

The head of sales at Troika Dialog has become the third senior banker at the Russian brokerage to step down in less than three months.

Gerrit Heyns, who has stepped down from his position after joining Troika in 2002, follows the resignation of the firm's chief executive for the U.K. division, Howard Snell, and the departure of Giedrius Pukas, the managing director of Troika Capital Partners in late May.

A Troika Dialog spokeswoman said Mr. Heyns hadn't left the firm and would be retained in some capacity. "Gerrit has gone on a kind of academic leave," she said. "There's no arrangement yet. He has gone away to think about his future but he is still with Troika."

Troika Dialog entered a strategic alliance with South African bank Standard Bank in March after selling a 33% stake in itself for $200 million and is reorganizing its business lines to integrate it with the Standard's Moscow-based operations.

Mr. Heyns, who is one of the senior partners at Troika, is one of the most experienced and well-known bankers in Moscow.

Prior to joining Troika, he helped to establish the equity business of Kleinwort Benson in Asia as its first head of equity sales in Hong Kong. He later joined Lehman Brothers to establish and manage an institutional equity sales team as its head of sales and went on from there to be head of sales for J.P. Morgan Securities.

He began in the equity broking business in Bangkok as a salesman and then head of sales with Crosby Securities, which later became SocGen Securities Asia.

He couldn't be reached for comment.

Russian banks are hiring in numbers as domestic corporates queue up to issue new debt. After a 10-month break, the euro-bond market has been pried open for Russian issuers by OAO Gazprom and Russian Agricultural Bank, which recently raised a combined $3.25 billion on it.

UBS promotes for equities and structured products

Financial News

July 10, 2099

Jason Corcoran in Moscow

The head of emerging European equities at UBS has been promoted to a newly-created role as dedicated co-ordinator for structured products and equity capital markets for Europe and the US.

In a memo to clients, UBS said the promotion of Tulga Cordan was prompted by the growing importance of corporate financing for the bank’s franchise customers.

Cordan will act as a liaison between the bank’s structured products business RMP and equity capital markets.

Cordan, who been with UBS for eight years in a number of roles in specialist sales and sales trading, will site on the bank’s loan review group for both regions in addition to acting as liaison to ECM.

Additional responsibilities will include sitting on the equity global client committee and assisting the capital commitment team.

Cordan joined UBS from ABN Amro in 2001, where he had been a top-rated equity analyst.

UBS said there was nothing to announce yet regarding Cordan’s successor as head of emerging European equities.