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.

Crisis bites deep into Russian infrastructure programme

Business New Europe

Jason Corcoran in Moscow
June 5, 2009

Russia's Stalinist-like trillion-dollar infrastructure programme to revamp its crumbing roads, bridges, ports and airports over 10 years has been shaken by the global financial crisis. Many infrastructure projects have been postponed or cancelled due to the lack of available finance from domestic and international capital markets. And the Kremlin's much touted public-private partnership (PPP) programme to stimulate investment has yet to take off, while bankers hired to capitalise on an anticipated deal-making boom have been twiddling their thumbs for the past six months.

Senior financiers held a meeting with Deputy Prime Minister Sergei Ivanov at the start of the financial crisis in November last year and were told that the infrastructure programme for 2009 was being cut by 30%. The 2009 budget for infrastructure is believed to have been slashed again by a similar amount following the ruble's devaluation and dwindling federal revenues from lower commodity prices.

The government is now targeting selective projects in St Petersburg, Moscow and the Winter Olympic venue of Sochi as priorities for completion until the investment climate for foreign and private capital improves. Joerg Bongartz, chairman of the board of Deutsche Bank Russia, said the government was stepping in to meet the shortfall in showcase projects. "In Russia, there has been a reality check on infrastructure spending since the start of the crisis," Bongartz tells bne in an interview. "A significant amount of foreign capital was expected to be made available for a number of large infrastructure projects structured as public-private partnerships, but it appears now that if the government wants these projects to materialise, a larger share of the funding and the coverage of particularly the foreign exchange rate risk will need to come from the budget and government funds."

Bongartz said Deutsche Bank is still hoping to get involved in infrastructure via its corporate finance specialist team, its infrastructure and property management unit Rreef and DB Partners, and its joint venture with the Austrian construction firm Strabag.


Planes, trains and automobiles

The St Petersburg municipal government has said it will delay $13bn of infrastructure projects, which had attracted bids from international companies including Alstom, Siemens and Oleg Deripaska's Basic Element, due to the credit crisis deterring most private investors. Projects facing prolonged delays include the $10bn highway, known as the Western High-Speed Diameter (WHSD), the Orlov tunnel under the Neva River and a planned $1bn upgrade of Pulkovo airport. The Orlov tunnel and a fast-speed train link to the airport are likely to be postponed indefinitely.

The WHSD roadway encircling St Petersburg was meant to be the pioneering large PPP project in Russia, but the winning consortium formed by oligarch Oleg Deripaska and Strabag hasn't yet signed the concession contract governing the project. St Petersburg Governor Valentina Matviyenko said in April that some of the major projects of the city's road infrastructure would be built at the expense of the federal budget after private investors pulled out. The federal government is to allocate $617m for the construction of the WHSD roadway provided the city authorities keep their word to invest $198m.

A decision on the winning consortium for Pulkovo airport has been pushed back to June 25. The municipal government on May 21 whittled down the list of bidders to upgrade Pulkovo airport to three - Deripaska's Basic Element, Flughafen Wien in partnership with Leader, an investment house founded by Gazprom structures, and German Fraport in tandem with state bank VTB. Those that didn't make it on to the shortlist include Macquarie Renaissance, a joint venture formed by the investment banks Macquarie and Renaissance Capital to invest in Russian and CIS infrastructure; Germany's Hochtief in partnership with oil and mining tycoon Viktor Vekselberg; India's GMR; and Turkish TAV Airports.

A spokesman for Renaissance Capital in Moscow declined to comment on "specific transactions," but said the alliance sees the number and quality of potential deals increasing as industrial groups look to exit non-core investments, including infrastructure assets. Macquarie Renaissance's first fund raised half of its $1.5bn target last year. Most of the funds raised came from Russian and CIS multinational development agencies such as Vnesheconombank (VEB), the Kazakhstan State Development Bank and the Eurasian Development Bank.

VEB, which is the government agency responsible for infrastructure spending, has declined repeated requests for an interview. However, VEB's chairman, Vladimir Dmitiev, recently claimed on the VEB website that international agencies such as the International Finance Corporation and European Bank for Reconstruction and Development (EBRD) had expressed an interest in participating in the Macquarie Renaissance fund. Dmitriev said the fund's resources will soon be used for implementing infrastructure projects in CIS countries and more credit will be made available by VEB, the Kazakhstan State Development Bank and the Eurasian Development Bank.
"And we are absolutely sure that as soon as the [the Macquarie Renaissance Fund] starts operating, we'll get a number of private and institutional investors to participate in it, including ones from the Middle East," Dmitriev said in a statement on the VEB website.

Renaissance said fund raising continues to progress, and is making solid progress, but declined to give any specifics. The Russian investment bank, which has its own financing difficulties, insists that private investment still has a role to play in priority projects alongside government funding. "The process of private investment alongside the government will be evolutionary," explains the Renaissance spokesman. "Macquarie Renaissance Investment Fund, for example, is the first dedicated infrastructure fund to be focused on Russia and the CIS. As in other markets, investor interest will follow as the opportunities to invest ramp up."

One location where investors can be certain that most planned projects will be undertaken is Sochi, the Black Sea resort which will host the Winter Olympics in 2014. "Sochi is one of the priority areas for the government because of the reputational issue attached to hosting the Olympics," says Deutsche's Bongartz. "This has to be successful and there has to be a clear timeline for projects as the date is fixed. There still remains a great deal of interest from abroad from companies keen to get involved in services and construction."

Renaissance Capital parts with private equity pair

Financial News

February 2 2009

Jason Corcoran in Moscow

Renaissance Capital has parted company with two executives, Richard Olphert and Rory Cullinan, in a second round of job cuts at the Russian emerging markets investment bank, according to people with knowledge of the situation.

The Moscow-headquartered bank, run by New Zealander Stephen Jennings, has been cutting costs and retreating to its core Russian market following the sale of a 50% stake in the business last year to billionaire Mikhail Prokhorov.

A Renaissance spokesman declined to comment on the departure of Olphert, chairman of Renaissance’s private equity arm and a leading shareholder. The bank confirmed Cullinan, hired as deputy chairman of Renaissance Partners from private equity firm Permira Partners in August 2007, had left before the start of this year and the private equity team had been pared back to eight from a staff of 12.

Another casualty is global head of communications Simon Moyse, a former adviser to British Prime Minister Gordon Brown hired from UK-based press relations agency Finsbury in September last year.

After cutting a quarter of its 1,500 staff in November, Renaissance Capital insiders said a second round of redundancies is under way. RenCap’s London office, which once had 150 employees, has been reduced to a few dozen staff.

The departure of Olphert, a close ally of Jennings, surprised one Renaissance Capital banker, who said: “Richard was the second largest shareholder after Stephen. They lived close to one another, they went on holiday together on Stephen’s Gulfstream jet.”

Renaissance Partners, the private equity firm which raised a $600m fund last year, realised substantial losses through investments in Ukraine and Africa, according to Russian business paper Vedemosti. A Renaissance spokesman declined to comment on the reported losses.

Russian Banks Face Winter Freeze

Dow Jones International News

By Financial News reporters

17 November 2008

Just a year after they were engaged in a frantic war for the best talent, investment banks in Russia have started slashing hundreds of jobs and cutting pay.

Lay-offs at two of the country's largest domestic investment banks - Troika Dialog and Renaissance Capital - are approaching 1,000, and cuts will end up being substantially deeper than had previously been declared, according to bankers in Moscow.

Troika Dialog has begun cuts expected to total 500, or 35% of its overall staff, according to two bankers at the company. The bank was unavailable for comment. Renaissance Capital will cut 25% of its employees, according to an internal memo sent to staff, which represents about 375 of their overall staff of 1,500. However, bankers there said the figure will be higher.

A Rencap spokesman said nothing had been decided.

Elsewhere, there have also been 20 redundancies at mid-tier broker Trust Bank, according to a banker inside the company. VTB Bank is also cutting staff. Meanwhile, Ed Kaufmann, head of investment banking at Alfa-Bank, said the company was "trimming overall headcount" but is still hiring selectively.

Pay cuts are also in the pipeline. At Troika, those earning more than $3,000 (EUR2,357) a month have been told their pay will be slashed by 25%, according to one banker. Banking group Uralsib's staff have been told their salaries will be cut by 20%, while employees at broker Metropol earning more than $10,000 per month have been told their salaries will also be cut by 20%, according to staff at both companies.

Overseas banks that have piled into the market in the past year appear more resilient however. Merrill Lynch said it was not cutting staff in Moscow and UBS said it plans to increase staff.

www.efinancialnews.com

Russia braced for a bleak winter

Financial News

Jason Corcoran in Moscow and Harry Wilson

17 Nov 2008

Moscow-based investment bankers are at the sharp end of job cuts


Russian index slumps

It seems like a different age, but it was only recently that Moscow-based investment bankers had firms fighting to secure their services and could command pay packages commensurate with demand.

Senior Moscow-based bankers and those covering the Russian markets asked for and got lucrative pay deals as local brokers and large international investment banks fought a hiring war to build their businesses in the country.

Guaranteed packages in excess of $10m (€7.8m) were not unheard of and even junior staff with experience of the Russian markets received $1m guarantees to join rivals.

In early 2007, Russian investment bank Alfa-Bank recruited the head of UBS’ Moscow office Ed Kaufman for a reputed $20m over two years.

Speaking to Financial News at the time of his hiring by Alfa, Kaufman described his package as “very generous”, while declining to comment on the specifics.

US investment banks including Lehman Brothers spent similar sums to secure top bankers from rivals to give them the entrance they desperately wanted into Russia’s booming natural resources-fuelled economy.

However, after two and a half months in which the Russian stock market has lost 70% of its value and with the oil price at a three-year low, the days of the multi-million dollar guaranteed package are history and the hiring boom has turned on its head as the axe begins to fall on bloated and expensive banking teams.

Last week, Russia’s largest independent investment bank, Troika Dialog, began culling 20% of its workforce with the loss of about 300 jobs. However, the cut could be more severe and as many as 500 jobs are potentially at risk, equal to 35% of its staff.

Troika’s redundancies followed similar cuts at main Moscow-based rival Renaissance Capital, which after accepting a $500m investment from Russian billionaire Mikhail Prokhorov was forced to make hundreds of employees redundant as it cut a quarter of its staff.

Renaissance Capital had become known within the international banking community for its lucrative pay packets, which included large grants of stock and generous guarantees.

In 2007, Renaissance Capital’s total staff compensation bill came to $370m, equating to an average payout of more than $300,000 for each of the firm’s 1,145 employees.

Until recently, Renaissance Capital was deluged with CVs from staff at investment banks looking to escape job cuts in their own firms and join the seemingly invulnerable Russian boom.

Weeks before it was forced to accept Prokhorov’s money, Renaissance Capital hired John Porter, Morgan Stanley’s head of Middle Eastern and African equity capital markets, to lead its growth in the region.

Speaking to Financial News in the wake of Prokhorov’s investment, Renaissance Capital’s co-head of investment banking Andrew Cornthwaite said: “We have always taken the view that if you are involved in these markets you have to accept that some things will go badly wrong from time to time. We are comfortable with that.”

The hiring freeze has hit institutions thought to be relatively immune, such as state-owned bank VTB, which had spent hundreds of millions of dollars in the past 18 months building its investment banking business.

In a statement, VTB said it had frozen recruitment and would focus on risk management, setting up a unit to cope with the fallout from the financial crisis.

However, for staff made redundant by Russian investment banks the terms are still generous. Troika employees who lose their jobs will receive between five and eight months’ salary, which in many cases will not be far off the length of time employees had worked for the firm.

International banks are starting to scale back the size of their Russian operations too, just over 10 years after many of the same banks shut up shop in Moscow in the wake of the Russian Government’s default.

A Russian investment banker said: “It is different to 1998. Then, the pull back was focused on Russia; this time it is part of global retrenchment by banks to what they consider their core businesses.”

Rivals say Goldman Sachs is scaling back its staff in Moscow, though a source at the bank said it was currently “assessing market conditions, while the jobs of former ABN Amro employees are likely to be vulnerable in the wake of RBS’ announcement last week that it would make 3,000 redundant in its global banking and markets business.

This is a change from 11 months ago, when bankers such as Merrill Lynch chairman and chief executive John Thain flew into Moscow amid fanfare in the local and international media to meet then President Putin and open the bank’s Moscow office.

One banker at a Russian bank said: “Everyone has been hiring like mad for the last couple of years, but the party is well and truly over now.”

Merrill Lynch insisted it is not cutting staff in Moscow despite widespread rumours it is preparing to dismiss staff and even close the office. One source close to the bank said it was preparing to expand the operation. Despite the sombre mood in the Russian market, fee levels are not far down on 2007 and are substantially up on previous years.

Russian investment banking revenues for the year so far stand at $1.53bn, according to investment banking data provider Dealogic, down 13% on the same point last year, but up more than 50% on the same point in 2006, when fees hit a then record of $1.14bn.

Steve Meehan, head of UBS in Russia, said: “The number of competitors in this market will be reduced dramatically. For the long term, this correction will be positive for banks like us.”

The long-term prognosis for Russia is positive and, despite the fall in oil prices, most admit this is only a temporary blip. One Russian banker said: “The long-term trend has got to be for higher energy prices and Russia will obviously benefit from this. What you’re seeing now is the bursting of a bubble, not the end of Russia.”

Meehan said: “Russia is the only country that has got a top-10 position in all the mineral resources that matter."

Rencap sells 50% stake to billionaire Prokhorov

Financial News Online

Jason Corcoran in Moscow

22 September 2008

Russian investment bank Renaissance Capital has given up its much vaunted independence after selling a 50% stake to billionaire client Mikhail Prokhorov for $500m (€342m) amid the worst market falls in Moscow since the 1998 financial crisis.

Renaissance and the Onexim investment vehicle owned by Prokhorov, who made his money from metals and banking, will buy new equity amounting to 50% of the brokerage for $500m, with the old shareholders retaining a one-share voting majority.

The deal follows a week when market turmoil drove domestic indices down by 25% in just three days and forced another brokerage KIT Finance to agree to sell a controlling stake Leader Asset Management, the pension fund manager of energy giant Gazprom.

A Moscow spokesman for Renaissance said the deal had been in the pipeline for months but had been accelerated due to recent market conditions. "Events in the market moved the negotiations along."

A hastily arranged press conference featuring Prokhorov and Renaissance founder Stephen Jennings was organised at the Ritz hotel in Central Moscow.

Prokhorov said at the press conference: "We've been negotiating for several months. The problems of the global economy sped up the talks... Together with our partners we are ready for major expansion," including in Western markets.

Renaissance said it had not suffered any writedowns or losses due to the markets.

One Russian financier expressed surprise that Renaissance had sold so cheaply. "The market has hit everyone but I thought Rencap would fetch more. Bankers were putting the value of the investment bank at $3-4bn a year ago," the financier said.

Jennings, who set up Rencap in 1995 with a Credit Suisse colleague Boris Jordan, had previously rebuffed interest in the business from western banks and state-controlled VTB Bank.

In an interview with Financial News a year ago, he said selling out, as rival brokerages Brunswick and UFG have, would ruin Rencap's reputation for providing clients with impartial and independent services.

He said: "It would be very damaging and what you sold would be slightly damaged by the time you sold it. By virtue of the sale process, you would lose something. We have seen that has happened in the market here."

In a statement today, Jennings said: "The partnership with Onexim creates a financial powerhouse with the resources, skills and ambition to be the clear leader in all its markets. At a time when many of our competitors are weakened, our unique franchise, solid capital platform and highly motivated staff will enable the firm to aggressively pursue growth opportunities."

Renaissance Group's other asset management, private equity and consumer finance arms are not part of the sale.

Onexim is one of Russia's largest private investment funds, with a focus on mining industry, innovative projects in energy and nanotechnology, real estate and other industries. It has more than $25bn in assets.

Prokhorov was joint owner of mining giant Norilsk Nickel alongside Vladimir Potanin until a very public business divorce led him to sold most of this stake to tycoon Oleg Deripasksa earlier this year.

Renaissance advised Onexim last year on the exchange of its 25% stake in Norlisk Nickel with Deripaska.

A Rencap source said the bank's independence would not be damaged by selling to Prokhorov's group. "Onexim is not Gazprom or the Kremlin. It's an independent investment vehicle."

Onexim will contribute to the strategic direction of the investment bank and will be able to nominate three of the seven board members of Renaissance Capital.

Renaissance Capital was created in 1995 by New Zealander Jennings and American Boris Jordan, who left top positions at the Russian division of Credit Suisse First Boston to establish their own business. Jennings is believed to own an 80% stake in the business.

Following Russian default on its sovereign debt and the economic crisis in 1998, Jennings bought out three other shareholders, Leonid Rozhetskin, Richard Ditz, and Anton Kudryashov, and took sole charge when Jordan left.

In the past two years, Jennings had led the bank's rapid expansion to set up in new frontier markets in Sub-Saharan Africa and Central Asia.

www.efinancialnews.com

RenCap doubles employee levels

Financial News

Jason Corcoran in Moscow and Tara Loader Wilkinson
23 June 2008


Russian investment bank Renaissance Capital has more than doubled its workforce over the past 18 months and is still hiring, while many of its rivals have been cutting jobs to save costs.

Staff numbers at the bank, which specialises in emerging markets including Russia and sub-Saharan Africa, have grown from 500 at the start of last year to about 1,200 as of last week.

The bank said: “We have identified huge opportunities to create value in a range of frontier markets around the world, and that has led us to recruit talented people to pursue those opportunities and meet our aggressive targets. We have grown rapidly in the past year or two, against a backdrop of downsizing by many of our competitors.”

The bank is opening a distribution hub in Singapore and has hired Merrill Lynch’s former head of Asian equities, Martin Gillott, to run it. The operation will act as a distribution base for Renaissance Group products, focusing on institutional securities and international equity sales.

Renaissance, which was founded 13 years ago, joins Russian rivals Troika Dialog and VTB Bank in setting up operations in Singapore and trying to develop links with its investment institutions there.

The bank is also applying to Singapore’s regulator for a banking licence and may extend the office’s remit depending on demand.

Gillott, who joins Renaissance as managing director and head of distribution Asia, quit Merrill Lynch last year and returned to London.

The bank recently launched an operation in Dubai for the roll-out and development of investment banking and asset gathering activities in the Middle East. It also has distribution hubs in London and New York.

Renaissance last week advertised to hire directors, vice-presidents, associates and senior analysts in investment banking, for positions based in Moscow and Kiev, in Almaty, Kazakhstan, and in Lagos, Nigeria.

Renaissance declined to say how many staff it was looking to hire.

Lehman launches second campaign in Russia

Wall Street Journal - Financial News

Jason Corcoran in Moscow

21 April 2008


Bank’s two most senior executives in the country tell Financial News why they are building their Moscow team


Nick Jordan


This August will mark 10 years since Russia defaulted on $40bn (€25bn) of treasury debt. The anniversary will coincide with Lehman Brothers moving into its new Moscow office, a decade after the US investment bank and other bulge bracket firms lost billions in the resulting financial meltdown.

olitical stability and a boom in capital markets have brought the banks scrambling back, but some remain sensitive about the events of 1998.

Lehman was hit badly by the financial crash although it has never disclosed its losses. The bank is believed to have recovered only a fraction of its shortfall by freezing the UK-based assets of two Russian banks after contending Inkombank and Uneximbank had defaulted on obligations.
The European management, led by Jeremy Isaacs, had to work hard to convince New York-based chairman and chief executive Richard Fuld to re-enter the market. Lehman’s two most senior executives in Russia, Peter Ghavami and Nick Jordan, said the move to set up a full service investment bank in Moscow was preceded by a robust discussion at the bank.

Ghavami, head of capital markets in Russia, said: “Any company going into Russia would have a debate about capital allocation and that is healthy. I would not describe those debates as being between individuals. It’s a case of where do you want to put your capital and the decision was made very strongly to go to Russia.”

Ghavami, who joined last year from UBS where he was global head of commodities, added: “We have committed to building a strong local presence. We have received a broker-dealer licence, we are moving into permanent office space and we are building teams of people who will be based here permanently.”

Lehman underlined its intentions for the Russian market last year by hiring Jordan from his position as co-head of Russian investment banking for Deutsche Bank in London. Jordan, one of the best-regarded bankers in the country, is partnering Ghavami to build Lehman’s Russian business. He spent 10 years at Deutsche, where he worked on deals involving energy company Gazprom and other companies closely linked to the Kremlin.

Jordan, whose brother Boris founded Russia’s Renaissance Capital with Stephen Jennings, said Lehman’s opening in Moscow had been prompted by its clients.

He said: “You have to be there at the same time your clients want to be there. Our global institutional client base, both public and private, necessitated our move into Russia and the corporate sector with its strategic interest in Russia’s business sector.”

Ghavami and Jordan said Lehman’s expansion into Russia reflected the bank’s European and Asian growth and moves into commodities and foreign exchange.

The pair are confident Lehman has entered the Russian market at the right time despite a drought in equity issuance during the first quarter and a slackening in Russian corporate borrowing as a result of the credit crisis.

Healthy mergers and acquisitions dealflow has helped fill the void. Data provider Thomson Financial estimated Russian M&A volume at $14.2bn in the first quarter, only 4% lower than a year ago.

The bank, which received its broking and dealing licence from the Federal Financial Markets Service in January, will move into new offices at Naberezhnaya Tower II in Moscow City, the capital’s emerging business district three kilometres west of the Kremlin. Ghavami will move to Moscow from London. Jordan, who is based in London for family reasons, spends about three weeks a month in Moscow.

The pair said they had had no difficulties finding staff in spite of a battle for talent in Moscow. Many of Lehman’s international rivals, such as Merrill Lynch, Goldman Sachs and Credit Suisse, are expanding their operations in Russia.

Ghavami said: “We don’t believe the competitive landscape is something to be afraid of. It’s a healthy indication that there is a lot of value being in Russia.”

Jordan’s contract at Deutsche Bank prevented him from hiring former colleagues for a period. That arrangement has expired and he has brought in Stan Raskin as head of investment banking and Oksana Buto as a director.

Irina Volkova has joined from Merrill Lynch as chief administrative officer and Burat Karimov has been hired from local bank Uralsib Financial as a director.

Nikolai Varma is the most recent hire, joining as an executive director in Lehman’s financial institutions group from Credit Suisse. Lehman last year recruited a research team to cover Russian equities from Moscow. Viktor Shvets was hired as managing director from New York-based Moon Capital Management, where he led telecommunications research, to run a team of three analysts in Moscow.

Pavel Mamai, formerly at Renaissance Capital, joined as a credit analyst, and Vladimir Zhukov arrived from local lender Alfa Bank to cover metals and mining stocks.

Lehman intends to phase out its M&A advisory tie-up with Renaissance Capital because the two have become competitors rather than joint venture partners. Under the arrangement, Lehman and Renaissance have completed several deals in the natural resources sector. Sources close to the banks said they might co-operate in a new format.

Lehman to end Russian joint venture

Financial News

Jason Corcoran in Moscow

21 April 2008


US investment bank Lehman Brothers is phasing out its M&A advisory joint venture with Russia’s Renaissance Capital as it builds its presence in Moscow. The move comes just weeks after bank Royal Bank of Scotland announced the end of its derivatives joint venture with the Russian group.

Lehman, which re-entered the Russian market last year, anticipates being up to scale by September when it moves into its new offices in the emerging business district of Moscow City.

A source close to the bank said: “The arrangement is being phased out. As we build out our own M&A capabilities in Russia, the need for that is diminished as we become more like competitors rather than joint venture partners.”

The tie-up had seen the two banks co-operate on a number of deals in the natural resources sector over the past few years.

Nick Jordan, who is leading the investment banking business for Lehman in Moscow, previously advised energy group Gazprom and other blue chips on some of their biggest acquisitions.

Renaissance founder Stephen Jennings last year said the arrival of Jordan from Deutsche Bank would not threaten its agreement with Lehman.

Renaissance was unavailable for comment.

Russia boost for Dresdner

Financial News

Jason Corcoran in Moscow
26 Mar 2008


Dresdner Kleinwort landed a hat-trick of advisory mandates in Russia last week, including a role as counsel on the largest ever deal in the country’s consumer sector, as the German investment bank bids to re-establish its position in Russia's capital markets after sliding down the league tables last year.

The German bank has been hired as an adviser, alongside domestic bank Renaissance Capital, by US soft drinks giant PepsiCo and Pepsi Bottling Group on its $1.4bn (€891m) acquisition of Russia’s leading juice maker Lebedyansky. The deal is the biggest in Russia’s booming consumer sector to date.

The deal allows PepsiCo to leapfrog rival Coca Cola in Russia's juice market. Coca Cola paid $500m for number two player Multon in 2005.

A banker close to the PepsiCo deal said: "The turbulence in the credit markets over the past six months has meant that the balance of power in competitive auctions has shifted from financial sponsors back to strategic players such as PepsiCo in this instance."

Dresdner also had a role on the $180m sale of an 85% share in the Parliament vodka brand by Copecresto Enterprises to Polish spirit maker Central European Distribution Corp. Renaissance Capital advised Parliament alongside Dresdner.

A banking source indicted there was significant interest from international spirit companies Bacardi and Diageo in the Parliament sale.

Its position as adviser on these deals completed a hat-trick of mandates for Dresdner last week after it acted as joint financial adviser, together with Alfa Bank, on the sale of a 33.47% stake in the electricity utility TGK-2 for $392.9m to Kores Invest company, a joint venture created by RWE and Sintez Group.

The German bank is recruiting an additional 60 bankers to cover Russia in an attempt to regain its position as one of the pre-eminent banks in the region after faltering in the past year.

Dresdner dropped out of the top 22 banks in data provider Thomson Financial's equity capital markets tables last year. It had topped the poll in 2006 thanks to its joint-bookrunner mandates on the Rosneft and TMK initial public offerings.

In mergers and acquisitions tables, Dresdner was ranked 18th last year, compared with its ninth position in 2006.

Senior representatives from the bank are currently working on a potential $85bn metals merger between Norilsk Nickel and Metalloinvest.

The tie-up has been devised in a bid to block a rival takeover attempt by aluminium giant Rusal, which is majority-owned by oligarch Oleg Deripaska.

Rusal has appointed six investment banks, led by Merrill Lynch and Credit Suisse, in its bid to buy a blocking stake and take control in nickel producer Norilsk.

www.efinancialnews.com

Russian bank hires former SEC chairman

Financial News

March 24, 2008

Jason Corcoran in Moscow

Russian banking group Renaissance Capital had hired former chairman of the US Securities and Exchange Commission William Donaldson as a senior adviser.

Donaldson, who stepped down from the SEC in July 2005, has been brought on board to build links between the investment bank and Wall Street.

The former co-founder, chairman and chief executive of US investment banking firm Donaldson, Lufkin & Jenrette, served just over two years following his appointment by his friend President George Bush in April 2003.

Donaldson, the 27th chairman at the SEC, retired after
drawing sharp criticism over the Sarbanes-Oxley legislation, which is designed to increase corporate accountability, and his zealous approach to regulation.

He presided over investigations into mutual fund trading abuses, hedge funds and equity research. Under his leadership, the SEC, frequently working with other state and federal regulators, drew billions of dollars in fines and restitution from firms found guilty of fraud or wrongdoing.

Donaldson, who also served as chairman and chief executive of the New York Stock Exchange, was appointed as advisory council chairman of boutique Perella Weinberg last year.

At Renaissance’s investor conference in Kiev last year, Donaldson spoke on the same platform as the bank’s founder Stephen Jennings.

The pair have known one another since DLJ partnered with Renaissance to bring Russian telecommunications firm Vimpelcom to the New York Stock Exchange in 1997.

In the same year, DLJ announced it would open an office in Moscow just prior to the Russia’s financial crash.

DLJ was one of a roster of Western banks that lost $40 billion when the Russian government defaulted.

On a trip to Moscow a decade ago, Donaldson said the biggest barriers for Russian companies listing overseas were the conversion to Western-style accounting and corporate governance.

Leading Russian search engine Yandex plans to float shares on New York’s Nasdaq this Autumn and Renaissance is one of the three banks who have been hired to organise the offering.

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Renaissance readies partnership deal in Korea

Financial News

Jason Corcoran in Moscow

20 February 2008

Russian investment bank Renaissance Capital is to sign a partnership agreement with Korean bank Hanwha Securities to give Korean retail investors access to Russian asset management products.

Renaissance has investment banking joint ventures with the Royal Bank of Scotland and Australia’s Macquarie Bank, along with an informal mergers and acquisitions tie-up with US bank Lehman Brothers.

Stephen Jennings, Renaissance’s founder, last year told Financial News the bank could only do a limited number of partnerships. He said: “How many best friends can you have? You can only have a small number.”

Alexander Kotchoubey, managing director of Renaissance Investment Management, said the two banks had signed a memorandum of understanding to work together – initially in asset management and brokerage, with a view to developing the relationship further in investment banking.

Kotchoubey said: “There is a revolution happening in retail capital. People are looking for substitute markets and the Koreans have been investing in Chinese bonds and are now looking for substitute markets to invest in.”

The two banks will shortly launch a Russian mutual fund in Korea and plan to develop hedge funds and wealth management products.

Hanwha, a subsidiary of one of Korea’s top 10 conglomerates, was chosen as a partner because it has launched a fund investing in Kazakhstan. Renaissance is developing a full-service central Asian investment bank located in Kazakhstan’s financial capital Almaty. Staffing there is being doubled to more than 80 personnel.

Kotchoubey said: “We are very bullish about the central Asian marketplace, as is Hanwha. Korean companies such as Samsung have car factories in Kazakhstan and are expanding in the region. At the moment, the relationship is about investment management but it will develop.”

An agreement is expected to be signed by the end of the month.

RenCap to double staff in Africa and Asia

Financial News

Jason Corcoran in Moscow
21 Dec 2007



Emerging markets investment bank Renaissance Capital aims to double the headcount in its African and central Asian operations next year to 260 bankers.

Renaissance, which set up shop in Africa earlier last year, is recruiting an additional 100 bankers for its sub-Saharan hub in Nigeria's Lagos and its offices in the Kenyan capital Nairobi.

The bank is also establishing a full service investment bank in Kazakhstan's financial capital Almaty as a launchpad into other central Asian markets such as Uzbekistan. Staffing in Almaty will be doubled to 60.

Karl Franzmann, global head of recruitment at Renaissance, said the bank required investment bankers, equity research analysts and sales and traders for its new markets.

He said: "We are going to look at how the downturn will affect the bulge bracket banks. They have made commitments before to emerging markets and then pulled out. There are a lot of experienced expatriates working in New York and London and they might be looking at their options to return home in a few months time."

Renaissance will run a global advertising campaign next week in the Wall Street Journal and the Financial Times.

Franzmann said the bank's main Russian business would grow by 25% next year. "In Russia the growth will be spread across investment banking, sales and trading, derivatives and research."

Peter Vanhecke, recently hired from Dresdner Kleinwort has been appointed to head up Renaissance's bank in Ukraine.

Renaissance is also opening another sales and distribution hub in either Singapore or Hong and expanding its New York office.

A London-based headhunter said some bulge-bracket banks like Credit Suisse and Deutsche Bank had already ring-fenced their emerging market operations to protect them in the event of job losses due to the US sub-prime crisis.

He said: "Emerging market operations are usually where heads start rolling first. Banks that haven't suffered from the credit crunch can leverage the relative weakness of other banks to build their platforms."

Senior Moscow bankers suggested Lehman Brothers might be most vulnerable in Moscow to cuts. "They have struggled to gain scale and Dick Fuld isn't very keen on Russia anyway," said one.

Troika plans shake-up of business lines

Financial News


Jason Corcoran in Moscow

22 October 2007

Russian broker Troika Dialog is shaking up its business following the departure of its head of investment banking, Dmitry Kushaev.

Troika’s head of capital markets Jacques Der Megreditchian has taken over from Kushaev, who left the bank without a new job.

A Troika source said: “Dmitry has packed up and gone. We don’t know what his plans are.”

Der Megreditchian joined Troika in 2000, having been in charge of capital markets and investment banking at French bank Société Générale in Moscow.

Troika, which rejected takeover approaches from JP Morgan and Credit Suisse last year, is tweaking its business lines to compete better with global banks operating in Moscow.

Managing director Andrei Sharonov, former Russian Deputy Economic Minister, is setting up a division to deal with large companies while a separate team will tackle new generation firms. Troika’s successful asset management operation is turning its focus to the mass-affluent segment.

The bank has also hired Philippe Rakotovao from Italian bond trading platform MTS as head of its international network to coordinate development of its offices in New York, London, Kiev, Cyprus and Kazakhstan.

Yuri Nechuyatov, who joins from accountancy Ernst & Young, has replaced Sanya Zezulin as chief financial officer and chief operating officer.

The bank, headed by Ruben Vardanian, who controls 65%, last month bought Armenian investment bank Armimpexbank and is in talks to buy the brokerage services arm of Russian bank VTB.

Troika this year shelved plans for a listing until after Russia’s presidential elections next year, having hired Goldman Sachs to look into a flotation.

Moscow market sources in Moscow said Troika was performing well in debt capital markets but its Russian rival Renaissance Capital had stolen a march in mergers and acquisitions, and equity capital markets.

A Troika source said: “I think we are there or thereabouts on ECM too but we are not projecting ourselves as well as Rencap.”

Data providers Dealogic and Thomson Financial placed Troika seventh and ninth, respectively, for M&A deals in the first half of the year.

www.efinancialnews.com

Macquarie and Rencap name joint venture leaders

Financial News
Jason Corcoran in Moscow
01 Oct 2007

Investment banks Macquarie and Renaissance Capital have appointed Igor Yurgens and Paulo Almeida to run their new Russian infrastructure joint venture.

Yurgens and Almeida, as chairman and chief executive respectively, will lead a Moscow-based team developing infrastructure advisory and fund management opportunities in Russia and the CIS countries.

As Renaissance’s head of Government affairs, Yurgens is responsible for relations with the Kremlin and Government institutions, which will be key if the venture is to take part in the anticipated boom in pubic/private partnership projects for infrastructure. Almeida is an associate director at Macquarie in London.

A team of 10 has been seconded to the new venture, Macquarie Renaissance, although that figure could double as investment grows.

Chris Baxter, Renaissance senior partner and Macquarie’s head of infrastructure advisory for Europe, will be closely involved and sector-specific experts from Macquarie’s London office may also be drafted in. It is estimated that up to $200bn will be spent on Russia’s creaking infrastructure in the next five years, excluding the oil and gas sector.

Bankers representing the joint venture are believed to be talking to Western institutions about investing in a new Russian-dedicated infrastructure fund. Some of the world’s biggest pension schemes, including the Canada Pension Plan Investment Board and the Netherlands ABP, are investors in Macquarie’s European fund.

Bob Foresman, deputy chairman of Renaissance Capital, said: “The joint venture is working on several opportunities and we plan to close some acquisitions in the coming months. We are obviously interested in new projects, such as the tunnel under the Neva river in Saint Petersburg.

“Russia is in dire need of transport and energy infrastructure and the private sector must collaborate with the public sector to help overcome this need.”

www.efinancialnews.com

Renaissance's new Africa fund seen capped at $1bn

Business New Europe

Jason Corcoran in Moscow


2007-09-19


Russia's Renaissance Investment Management expects to take in commitments worth $350m from institutional investors shortly after the launch of their new Africa fund on October 1.

The fund manager, which is a subsidiary of Renaissance Capital investment bank, is confident of capping the sub-Saharan equity fund at $1bn in 2008. "We have seen enough interest from fund of funds and institutions that we don't need to seed it. We expect to raise $350m by the end of the year and then we aim to cap it at $1bn next year," Daniel Broby, who was hired as chief investment officer three months ago, told bne.

Prior to Renaissance, Broby was head of investments at Denmark's third-largest asset manager Bankinvest, responsible for the investment process and the day-to-day running of the quoted equity, bond and guaranteed products. He launched Denmark's first and only regulated hedge fund on behalf of Bankinvest in 2005.

Broby said David Damiba, a Wall Street veteran of Merrill Lynch and Madoff Investment, and Kirsten Goliath have been hired to run the fund from London.

Renaissance's Dublin-listed fund, which requires a minimum investment of $100,000, will have strict redemption terms and will be targeted at institutions. A more illiquid and concentrated African fund will be made available to Russian investors shortly.

Flying visit

Broby said Renaissance staff had recently taken 35 managers from multinational investment funds on a 10-day whistle-stop tour of six African countries featured in the fund. Managers have already identified 540 listed companies that are suitable for investing in. Nigeria is the fund's main focus with exposure potentially accounting for 50%, while Kenya and the Francophone countries will make up most of the remaining allocation.

"We are not replicating what Fidelity or Union Bank of Switzerland have done," comments Broby. "Russian investors are different and our clients will expect higher returns than 7% from such funds."

"Our managers are used to delivering in frontier markets, dealing with corruption and lots of paperwork," he adds.

Fund management licenses are being sought throughout the region so Renaissance can open offices for managers and a research team on the ground. The funds team are piggy-backing on the investment bank, which has done two public offerings in Africa in four months. Renaissance is forecasting a capital flight in the near future because of the flat market at home and the impending presidential elections next year.

The group have recently opened offices in Zurich, Dubai, Singapore and Hong Kong to service the desire of clients to diversify. Renaissance Investment Management currently has $4.5bn in assets under management.


http://www.businessneweurope.eu

Oligarch expects adopted homeland to blossom

Financial News: Focus on Russia

Jason Corcoran in Moscow

30 July 2007




Stephen Jennings, founder of Russian investment bank Renaissance Capital keeps the faith in his new country

It’s clear Moscow is going to be a major capital market

Stephen Jennings, founder of Russia’s Renaissance Capital, may spend as much time in Nairobi expanding the bank’s sub-Saharan operations as in Moscow but he is not betting against the domestic market just yet.

The billionaire, one of two foreign oligarchs in Russia, made his fortune by keeping faith in the country and his investment banking business, which both came close to collapse after the financial crisis of 1998.

Having seen that out, the New Zealander is unlikely to pack his bags for home soon. Nor is he sitting on his laurels, having seen Renaissance break into the top 10 global underwriters of initial public offerings for the first time last month.

Jennings envisages Moscow becoming Europe’s second financial capital behind London, overhauling Frankfurt, Paris and Milan within 15 years.

He said: “It’s clear Moscow is going to be a major capital market. It already is in new issuance and overall market capitalisation. Imagine what’s going to happen with another 10 years of capital accumulation, and how big the domestic capital markets will be.

“Mortgage markets, securitisations markets and derivative markets will be very big. It sounds strange but when you think about it, it’s totally logical.”

Russia has the biggest and most liquid stock market in the region by far, with a market capitalisation of more than a $1 trillion (€723bn). It turns over billions of dollars every day. Its companies were third in the world in terms of fundraising through IPOs in the first half of the year, outpacing the UK and Brazil, according to auditor Ernst & Young.

Jennings admitted that beyond equity issuance, Russia lags its rivals. In terms of foreign exchange trading, commodities, debt and derivatives, Moscow is not on the global radar, he said. But this is changing. Derivatives are now the fastest growing area of Russia’s financial sector as the scale and diversity of Russia’s asset base and securities markets drives its development.

Jennings said Moscow could become the focus of an emerging regional capital market, although it would have to compete with Warsaw, which has attracted several Ukrainian IPOs.

He added: “We will start to see elements of a pan-CIS capital market and it’s more likely than not to be centred on Moscow. When markets get to a certain size, political pressure for that harmonisation will get to be a lot greater. We will see pan-CIS investment banks, we will see pan-CIS commercial banks and that’s starting to happen now.”

Moscow forms a natural bridge between Asian and European markets. For it to develop as a financial hub, Jennings said more widespread equity ownership and growth in domestic pension funds, mutual funds and insurance funds would be needed. Renaissance’s own fund arm, Renaissance Investment Management, is Russia’s market leader and has grown rapidly to $4.5bn in assets under management.

Some signs are encouraging, such as May’s IPO by state-controlled bank VTB. It was the first meaningful allocation of shares to retail investors. More than 131,000 of them applied for stock valued at approximately $1.6bn.

Institutional reform is vital to developing Russian capital markets and Jennings noted its pace has slackened recently, compared to the rate of change in Kazakhstan and Ukraine.

He said: “Russia has been quite good at cutting tax rates or streamlining and simplifying but it hasn’t been very good, so far, at building strong institutions. There will be another phase of reform and then Russia will go through a phase of modernising its institutions. Some aspects of capital market development will have to wait for that phase.”

Jennings said lack of banking reform has hampered financial intermediation and efficiency in financial systems, but has not affected the participation of foreign banks in Russia.

Foreign banks, including France’s Société Générale and Belgium’s KBC Group, were snapping up Russian lenders to gain a foothold in the booming consumer credit market, he said. Deutsche Bank, Barclays and HSBC have all recently outlined plans to enter the retail market.

“The market is substantively quite liberal in terms of foreign banks’ participation,” said Jennings.
“The global banks have not had the strategic commitment until now. They underestimated the opportunity and now they are paying for it.”

Investment banking was the most developed industry in Moscow, he said, with 37 companies, at the last count, scrabbling for clients.

A war for talent has been under way for a year and Renaissance has played its part. Recent hires include Petri Kivinen, global head of debt capital markets at Dresdner Kleinwort in London, Gordon McCulloch, co-head of Goldman Sachs’ Moscow office, and Richard Bruens, head of investor relations at ABN Amro.

“There are a lot of open cheque books out there and I don’t think paying a lot is enough to retain people in any environment – and certainly not in a really hot environment,” said Jennings.

Renaissance’s investment bank has more than 1,000 employees in Moscow and Jennings claims to have lost only one director to a rival over the past two years.

Renaissance is a private partnership and more than 100 employees own a stake in it. Employees who leave receive the book value of their stock which, while significant (it is valued at $1bn), does not represent its likely market value. Jennings owns 80% of the business, a stake that has been valued by bankers at between $3bn and $4bn.

Jennings is not concerned that forthcoming elections will affect his business adversely and, like many of Moscow’s leading bankers, he diplomatically refuses to be drawn into backing a successor to President Putin.

He said: “Putin brought a much-needed degree of stability when we had a large measure of anarchy. The name of the game now is going to be continuity: continuity politically and a high degree of continuity in terms of how the economy is developing.”

• Rencap’s strategy presents a strong case for joint venture

Rencap’s growth strategy is based on exporting its Russian business model to other emerging markets and developing alliances with leaders in other fields.

Jennings said Renaissance plans to increase the investment banking services it offers in frontier markets, having set up in sub-Saharan Africa and CIS countries including Kazakhstan and Ukraine. The bank is also expected to announce details of an infrastructure joint venture with Australian banking group Macquarie.

Jennings said going it alone was not an option for Renaissance. He said: “Unlike equity capital markets where we can create scale to have the best sales and best capital market professionals, it is very questionable that a go-it-alone model is efficient if you want to be strong in infrastructure. There is a strong case for us to team up with somebody – I think infrastructure is going to be one of the next big developments in Russia.”

The bank has an investment banking joint venture with the Royal Bank of Scotland and an informal M&A tie-up with Lehman Brothers. The latter is strengthening its Moscow operation and has recruited leading rainmaker Nick Jordan from Deutsche Bank to spearhead its push,

Denying this would jeopardise the alliance, Jennings said: “When Nick was running Deutsche, Renaissance used to do a lot of business with them. We would see Nick joining Lehman as a positive and certainly not a negative. There is some overlap but in terms of resources on the ground and critical mass, there is not much overlap.”

Rencap will limit the number of alliances it entered into, according to Jennings. He said: “You can’t do a lot of alliances. How many best friends can you have? You can only have a small number. The RBS joint venture in derivatives gives us a leading position in a market that we would otherwise be a two-bit player in.”

Jennings said the bank has a billion dollars invested in its sub-Saharan projects focused on Nigeria and Kenya. “We have a big challenge in Africa over the next 12 months but we don’t rule out looking at other markets.” Renaissance has no plans to sell to a rival or to float the company, despite its successes floating other Russian businesses.

Jennings, who set up Rencap in 1995 with a Credit Suisse colleague Boris Jordan, has rebuffed interest in the business from western banks and state-owned VTB. He said selling, as rival brokerages Brunswick and UFG have, would ruin Rencap’s reputation for providing clients with impartial and independent services.

He said: “It would be very damaging and what you sold would be slightly damaged by the time you sold it.

“By virtue of the sale process, you would lose something. We have seen that has happened in the market here.”

St Petersburg opens investment route for infrastructure funds

Financial News: Focus on Russia

Jason Corcoran
30 July 2007


Kremlin hopes the world’s largest investors will participate in the country’s first PPP project

Infrastructure investments in Russia could grow to as much as $200bn (€145bn) over the next three years as the Kremlin seeks new funding sources to improve the country’s crumbling roads, bridges, ports and airports. The Government estimates private investors will stump up $30bn to finance Russia’s first large public-private partnerships.

The Kremlin also hopes the world’s largest international infrastructure funds will participate in Russia’s first landmark PPP project, a ring road encircling St Petersburg. A roadshow showcasing the project for investors will be held in London during September.

Macquarie Bank, the Australian infrastructure pioneer, is working with local brokerage Renaissance Capital to provide financing for the $3bn high-speed diameter motorway. The two banks are also expected to announce a formal joint venture to participate in infrastructure projects all over Russia.

Stephen Jennings, chief executive of Renaissance, said: “There will be hundreds of billions of dollars of projects. The infrastructure financing requirement is massive. Russia will be very pragmatic at adapting private sector solutions. There will be a lot of projects and a huge range.”

Yuri Soloviev head of global markets in Russia and the Commonwealth of Independent States at Deutsche Bank, said it would participate in PPPs through its advisory and corporate financing arms, as well as its infrastructure and property management unit Rreef.

He said: “Russia is too big for global or niche players to ignore. The big funds are looking at investing and we are going to be involved in as many ways as possible, through the advisory route or from the financing in terms of the equity or debt perspective, or from the investing angle.”

Deutsche Bank is also planning to launch infrastructure bonds in Russia next year to help finance the groundswell of state-backed and private infrastructure projects. Half of the cost of the high-speed road around St Petersburg is to be met by the Government’s Investment Fund, and the remainder by private investors and the city.

The International Finance Corporation, the European Investment Bank and the Nordic Investment Bank have expressed interest in financing the project.

The European Bank for Reconstruction and Development may invest up to $250m in the construction of the road, which is to be Russia’s test case for PPPs. The EBRD’s remit in Russia is to invest in transport infrastructure, municipal infrastructure and infrastructure in the power sector.

Natasha Khanjenkova, deputy director of infrastructure and energy in Russia at the EBRD, said the bank was looking to increase its investment significantly.

She said: “In 2006, we invested over €300m ($412m) in these sectors. However, we are working to increase significantly our investments in transport, municipal infrastructure and the power sector. Our strategy for Russia is to increase over the next few years the share of these sectors to between 35% and 45% of the bank’s annual commitments.”

A survey published earlier this month by Merrill Lynch indicated that infrastructure spending in Russia would amount to $195bn over the next three years. Other estimates suggest the figure could be closer to $300bn.

The Merrill report said the overall investment on projects in Russia and the Gulf would eclipse spending in China and India. The focus in Russia will be on improving the energy distribution network, as well as electricity and road projects. Real estate, especially in Moscow, is also booming.

Michael Hartnett, global emerging markets equity strategist at Merrill, said the private sector and Russia’s oil wealth and large budget surplus would meet the projected spend. He said: “The private sector will account for the bulk of the spending. This is because we estimate that energy-related spending will account for roughly 70% of total spend and this will be undertaken by energy companies such as Gazprom. Residual spending on transportation, logistics and housing will be by the Government.”

Threats to funding would chiefly come from political instability in Russia and a collapse in energy prices, according to Hartnett. Soloviev believes the chronic economic and social need for new infrastructure will over-ride any political change at the top.

He said: “However, there are additional risks not present in the west, such as the issue of property rights and the differences between federal and sub-federal law.”

For the first 10 infrastructure projects it has selected for tendering, the Ministry of Economic Trade and Development will invest $30bn of private money, a 20:1 ratio on the Government’s initial commitment of $1.5bn. Some industry experts believe this is a little ambitious. Public finance initiative projects in the UK are typically financed with 10% equity and 90% debt.

Other potential obstacles for PPP investment in Russia are the lack of practical experience and unresolved tax issues such as the laws governing concessions, which form an important legal framework for private investment in public utilities.

• Such is the scale of investment in St Petersburg that analysts are suggesting President Vladimir Putin wants his home city to become Russia’s capital once again.

The former imperial capital, the Russian empire’s seat of power for more than 200 years, is regaining some of its old lustre after high-profile infrastructure projects costing an estimated $15bn (€11bn) were agreed.

Chris Weafer, chief strategist at Alfa Bank, said: “These showcase projects suggest the Government may be looking to move the capital. They could be looking at moulding it into Russia’s Washington as a way of setting up an alternative power base to Moscow.”

Government financing is in place for works such as the Orlovsky tunnel under the Neva River and the Western High-Speed Diameter toll motorway around the city. Other projects in the pipeline include a high-speed toll road to Moscow, a sea passenger terminal, a football stadium, bridges, an airport and the reconstruction of the New Holland Island in the city centre.

Natasha Khanjenkova of the European Bank for Reconstruction and Development said the bank would consider entering into public-private partnership schemes such as the high-speed motorway and Orlovsky tunnel.

She said: “We hope this will be a success that will lead to other big PPPs in Russia. Because it is the first high-profile project involving PPPs, the western high-speed motorway will certainly prove a test case. Private sector firms interested in the project want it to succeed, but they are also seeking to share risks with the Government in order to structure a viable project.”

Arthur Rakowski, a director at Australian investment banking group Macquarie, said there could be an appetite from global funds if the first large PPP does well.

St Petersburg is not the only area to benefit from spending on infrastructure. Winter sports resort Sochi won the right to host the 2014 Winter Olympics last month, which should attract investment to the Krasnodar region of southern Russia.

Yevgeny Muravyev, its deputy governor, said private investment in the region could exceed $20bn in the run-up to the games. “There are plans to establish more than 3,000 investment sites and European investors have started showing great interest,” he said.

Main construction projects planned include 11 large winter sports facilities, an airport terminal, 200km of motorways and railroads, and the construction of hotels.

Russia's Renaissance expands into Middle East and Southeast Asia

Business New Europe

Jason Corcoran in Moscow
2007-06-26

Russian investment bank Renaissance Capital is opening offices in Dubai, Singapore and Hong Kong to service its fast growing wealth and asset management business, bne has learnt.

Its expansion overseas is underpinned by a conviction that Russian private investors will want to diversify their portfolios and invest more abroad amid uncertainty ahead of next year's presidential election.

Stephen Jennings, chief executive of Renaissance Capital, says the Asian openings stemmed from existing Russian and CIS clients demanding access to key international finance markets.

In an interview with bne, Jennings said that clients within Russia and the CIS want international assets, and international custodian and wealth management services.

"As we go into other geographies, we will sell those same products to local clients in those markets also. It's about giving really tailored wealth management products to high net worth Russians, Ukrainians, Kazakhs and so forth," he said.

Renaissance's fund arm Renaissance Investment Management is Russia's market leader with almost $4.5bn in assets under management. Jennings said more than half of assets were accounted for by high net worth clients.

Domestically, Jennings welcomed the arrival of global wealth management players to Moscow, but suggested their strategy might not be best suited to Russia's ultra rich.

"UBS and Credit Suisse are tailored towards a global business. They would say otherwise, but their product is quite standardised. What we are dealing with in Russia is a completely new class of wealthy people. They are used to exceptionally high levels of service in other areas of their lives. They are not getting that highly tailored and high-end service from someone who is a generic wealth provider," he said.

UBS launched limited onshore private banking services in Russia in January, hot on the heels of Credit Suisse which launched in September last year. Other competitors in the onshore market include market leaders Deutsche Bank, Citigroup and Austria's Raiffeisen. UBS is offering wealth management, asset management, ruble fixed-income and foreign-exchange services alongside their existing Russian operations in equities and investment banking.

Jennings argues Renaissance can provide clients with a higher level of service along with best-of-breed products through white-labelling - the selling of externally managed funds that are branded as its own.

"It's not an option for us to give people anything but a Rolls-Royce service," he said. "International products are all available through white-labelling and open architecture so there is nothing by way of product that an international bank can provide that we can't. What we can do that is different is the tailoring of products, including domestic products, the location of service and the whole nature of the relationship."

Africa and elsewhere

The bank is targeting the top segment of the market and clients with a minimum investment size of $1m. Actually, the average account size is in excess of this, at over $6m, while the largest single account is just above $100m.

Renaissance recently launched its investment bank in Sub-Saharan Africa. Asset management and wealth management services will follow in time, according to Jennings.

The move to set up operations in Asia and the Middle East follows the recent launch of operations in Geneva, the backyard of the Swiss wealth management giants.

Philippe Magistretti, head of private banking at Swiss bank Union Bancaire Privee, has been hired to run the business. Magistretti joined UBP in 2004 from Lazard Freres, where he was a partner. He was previously head of the French derivatives operation for the US insurance giant American International Group. His new title is chief executive of Renaissance Investment Management Switzerland.

Renaissance has received a Swiss banking license and is looking to increase its headcount in Geneva from six to 15 by December.

Both Jennings and his deputy Neil Harvey insist Renaissance's overseas expansion is not a hedge against Russia.

"We are 110% focused on Russia," said Harvey. "We have a unique model suited to frontier-type capital which we are applying elsewhere."

www.businessneweurope.eu

Renaissance Capital Reveals Global Wealth Management Ambitions

Wealth Briefing

June 12, 2007

Jason Corcoran in Moscow


Renaissance Capital, the Russian investment bank, is planning to open offices in Dubai, Singapore and Hong Kong to service its fast growing wealth and asset management business.

Its expansion overseas is underpinned by a conviction that Russian private investors will want to diversify their portfolios and invest more abroad amid uncertainty ahead of next year's presidential election.

The move to set up operations in Asia and the Middle East follows the opening of an operation in Geneva, as revealed by WealthBriefing in April.

Stephen Jennings, the chief executive of Renaissance Capital, said the push overseas stemmed from existing Russian and CIS clients demanding access to international financial markets.

In an exclusive interview with WealthBriefing, he said: "Clients within Russia and CIS want international assets, international custodian and wealth management services. As we go into other geographies, we will sell those same products to local clients in those markets also. It's about giving really tailored wealth management products to high networth Russians, Ukrainians, Kazakhs and so forth."

Renaissance's fund arm Renaissance Investment Management is Russia's market leader with almost $4.5 billion in assets under management. Jennings said more than half of assets were accounted for by high net worth clients.

Domestically, Mr Jennings welcomed the arrival of global wealth management players but suggested their strategy might not hit the mark.

He said: "UBS and Credit Suisse are tailored towards a global business. They would say otherwise but their product is quite standardised. What we are dealing with in Russia is a completely new class of wealthy people. They are used to exceptionally high levels of service in other areas of their lives. They are not getting that highly tailored and high-end service from someone who is a generic wealth provider."

Mr Jennings argued Renaissance can provide a both high end service to its clients and the best products through white-labelling.

He added: "It's not a option for us to give people anything but Rolls-Royce service. International products are all available through white-labelling and open architecture so there is nothing by way of product that an international bank can provide that we can't. What we can do that is different is the tailoring of products, including domestic products, the location of service and the whole nature of the relationship."

Renaissance said it provides clients with a high level of service, an individual approach and flexibility in the management of their investment such as a no redemptions fee policy.

The company targets the top segment of the market and clients with a minimum investment size of $1 million. Actually, the average account size is in excess of this, at over $6 million, while the largest single account is just above $100 million.

Mr Jennings left CSFB to launch Renaissance Capital in 1995 and took control of the firm in the turmoil following the Russian debt crisis in 1998.

He has since transformed Renaissance into Russia 's first full service western-style investment bank and it has since gone from strength to strength, riding the wave of foreign investor interest in the country.

Mr Jennings, who has a controlling stake in the business rumoured to be worth $2 billlion, has rebuffed interest in his business from Western banks and state-owned VTB. He has said selling out would ruin the bank's reputation for providing clients impartial and independent services.

Renaissance recently launched its investment bank in Sub-Saharan Africa. Asset management and wealth management services will follow in time, according to Mr Jennings.

www.wealthbriefing.com