Financial News
By Jason Corcoran
27 April 2009
Letter from Moscow
The opening of upmarket Japanese restaurant Nobu this month on Moscow’s elite shopping drag of Stoleshnikov Lane is long overdue, but its timing may be suspect.
Sushi and sashimi have long overtaken borscht and blini as the preferred staple of moneyed Moscovites. In fact, local Mexican and Italian eateries nearly always provide an extensive sushi menu, along with the obligatory hookah water-pipe, to cater for the demand.
The Nobu chain, which was co-founded by Hollywood actor Robert De Niro, opened in Moscow a fortnight ago after three years of planning.
Both De Niro and his partner Nobu Matsuhisa flew in for the occasion and had to bat away questions about opening a high-end dining establishment during an economic crisis.
Some of the area’s previous tenants have fallen victim to the credit squeeze, with fashion boutiques owned by Alexander McQueen and Stella McCartney shutting up shop earlier this year. Moscow’s fickle restaurant trade has also been badly hit with sales plummeting by as much as 50% since the financial crisis began, according to consulting group Restcon.
Sushi is a saturated market and there is some evidence to suggest patrons are favouring mid-market chains Yaposha and Tanuki rather than splashing out in upmarket versions owned by the ubiquitous Arkady Novikov, who is Russia’s answer to Gordan Ramsay.
Sourcing huge volumes of fish for a land-locked city must also add to the expense and Nobu’s prices may put off some cash-strapped oligarchs.
US magazine Forbes says the economic downturn has wiped more than $500bn from the fortunes of the 100 wealthiest Russians in the past year. In its annual rating, Forbes estimates the combined wealth of Russia’s 100 wealthiest people is about $197bn. Last year, it was $720bn.
The crisis has hurt the Bolshoi Theatre, where budgetary constraints forced it to scrap a premiere of Othello and call off a ballet tour of Mexico. The audience at a recent classical performance in the Tchaikovsky Concert Hall was less than half full as spending on arts takes a hammering.
Over on Red Square, even the mummified corpse of Soviet leader Lenin is feeling the pinch. The founder of the Soviet Union usually has suits of the finest materials ordered every three years from Switzerland. Tough times mean he’s going without new clothes for his 139th birthday.
Demand for luxury yachts and private jets has collapsed, according to an industry source close to the situation. New car sales in Russia declined 40% overall in the first quarter, but a few luxury brands such as Hummer and Cadillac are bucking the trend.
Russia’s oligarchic class may be tempering their conspicuous consumption. Stories of outlandishly lavish birthdays and high-jinks in Alpine resorts have been thin on the ground at a time when many magnates are going cap-in-hand to the Kremlin.
But there are signs the Government has run out of patience with indebted oligarchs. The Kremlin has already frozen a $50bn facility at state corporation VEB to help refinance foreign debts after just $11bn was distributed.
Sergey Stepashin, chairman of the audit chamber, recently warned the wealthy to sell their jets, villas and football clubs to settle their accounts rather than asking for state help.
Russian businessmen owe about $500bn in foreign debt, with $130bn due this year. Many are in tough negotiations with western creditors and will be forced to take their medicine unless the state decides otherwise.
Showing posts with label oligarchs. Show all posts
Showing posts with label oligarchs. Show all posts
Tuesday, 28 April 2009
Thursday, 29 January 2009
Oligarchs beware
Guardian Unlimited
By Jason Corcoran
Vladimir Putin's denial that he is a 'billionaire-slayer' looks increasingly unconvincing
The Russian prime minister Vladimir Putin will have raised someeyebrows amongst west London's oligarchical clique by rebuffing his image as "a billionaire-slayer".
Putin has been wielding his power to lance the ambition of aspirational tycoons for almost a decade and is showing no signs of stopping now. In an interview with Bloomberg, the Russian leader insisted the country's rules and laws are a level playing field for all of its citizens.
Well, tell that to jailed oil tycoon Mikhail Khodorkovsky, who haslanguished in a Siberian prison since 2005 on back-dated charges of tax evasion in what many viewed as an attempt to silence a political opponent. A court rejected Khodorkovsky's parole request last year, citing reasons such as a refusal to take part in a sewing course.
Putin had told a meeting of oligarchs early in his reign in 2000 itwas either his way or the highway. Some of Russia's wealthiest and most prominent businessmen, such as Boris Berezovsky and Vladimir Gusinsky, were forced to flee Moscow soon after. The pair had controlled TV stations which were critical of Putin's leadership.
Magnates such as Chelsea football club owner Roman Abramovich and Viktor Vekselberg opted to play ball. The former agreed to sell his oil company Sibneft to state behemoth Gazprom while Vekselberg impressed by splashing out a fortune to repatriate Faberge eggs to the Kremlin.
The credit crisis has put the current crop of oligarchs under thespotlight as they strain to repay hefty foreign loans and respond to the Kremlin's call to chip in more taxes to help foot the national budget.
The founder of Russia's leading mobile phone chain, Yevgeny Chichvarkin, was last week reported to have fled to London after appearing on the federal wanted list. He is accused of being involved in the kidnapping and blackmail of a former employee in a case with political undertones. Chichvarkin is joined in exile by the former president of the oil company Russneft Mikhail Gutseriyev, who fled 18 months ago in order to avoid tax evasion and other charges. Russneft has since been acquired by Oleg Deripaska, who is considered to be Putin's favourite industrialist.
Putin has the financial wherewithal and the whim to decide which oligarchs survive. Vnesheconombank (VEB), the state development bank charged with bailing out troubled companies, is chaired by the prime minister. More than 100 businesses are believed to have gone cap-in-hand to VEB, which has dished out $1 billion to Evraz, the steel and mining group part-owned by Abramovich. Deripaska, once Russia's richest man, benefitted when VEB stepped in to refinance a $4.5bn loan that he had taken out to buy a 25% stake in the mining company Norilsk Nickel.
The credit crunch has also shown up the first cracks in therelationship between Putin and his protege Dmitri Medvedev, who replaced him as president last year.
Unlike his mentor, Medvedev has never been a member of the spying classes. A lawyer by training, he claims to want a strong independent judiciary to decide the fate of bent businessmen. He has twice subtly criticised Putin's government for its handling of the crisis but it remains to be seen whether the ruling tandem is wobbling from its course. Putin still controls the strings and Medvedev can only become the puppetmaster if he cuts them.
guardian.co.uk © Guardian News and Media 2009
By Jason Corcoran
Vladimir Putin's denial that he is a 'billionaire-slayer' looks increasingly unconvincing
The Russian prime minister Vladimir Putin will have raised someeyebrows amongst west London's oligarchical clique by rebuffing his image as "a billionaire-slayer".
Putin has been wielding his power to lance the ambition of aspirational tycoons for almost a decade and is showing no signs of stopping now. In an interview with Bloomberg, the Russian leader insisted the country's rules and laws are a level playing field for all of its citizens.
Well, tell that to jailed oil tycoon Mikhail Khodorkovsky, who haslanguished in a Siberian prison since 2005 on back-dated charges of tax evasion in what many viewed as an attempt to silence a political opponent. A court rejected Khodorkovsky's parole request last year, citing reasons such as a refusal to take part in a sewing course.
Putin had told a meeting of oligarchs early in his reign in 2000 itwas either his way or the highway. Some of Russia's wealthiest and most prominent businessmen, such as Boris Berezovsky and Vladimir Gusinsky, were forced to flee Moscow soon after. The pair had controlled TV stations which were critical of Putin's leadership.
Magnates such as Chelsea football club owner Roman Abramovich and Viktor Vekselberg opted to play ball. The former agreed to sell his oil company Sibneft to state behemoth Gazprom while Vekselberg impressed by splashing out a fortune to repatriate Faberge eggs to the Kremlin.
The credit crisis has put the current crop of oligarchs under thespotlight as they strain to repay hefty foreign loans and respond to the Kremlin's call to chip in more taxes to help foot the national budget.
The founder of Russia's leading mobile phone chain, Yevgeny Chichvarkin, was last week reported to have fled to London after appearing on the federal wanted list. He is accused of being involved in the kidnapping and blackmail of a former employee in a case with political undertones. Chichvarkin is joined in exile by the former president of the oil company Russneft Mikhail Gutseriyev, who fled 18 months ago in order to avoid tax evasion and other charges. Russneft has since been acquired by Oleg Deripaska, who is considered to be Putin's favourite industrialist.
Putin has the financial wherewithal and the whim to decide which oligarchs survive. Vnesheconombank (VEB), the state development bank charged with bailing out troubled companies, is chaired by the prime minister. More than 100 businesses are believed to have gone cap-in-hand to VEB, which has dished out $1 billion to Evraz, the steel and mining group part-owned by Abramovich. Deripaska, once Russia's richest man, benefitted when VEB stepped in to refinance a $4.5bn loan that he had taken out to buy a 25% stake in the mining company Norilsk Nickel.
The credit crunch has also shown up the first cracks in therelationship between Putin and his protege Dmitri Medvedev, who replaced him as president last year.
Unlike his mentor, Medvedev has never been a member of the spying classes. A lawyer by training, he claims to want a strong independent judiciary to decide the fate of bent businessmen. He has twice subtly criticised Putin's government for its handling of the crisis but it remains to be seen whether the ruling tandem is wobbling from its course. Putin still controls the strings and Medvedev can only become the puppetmaster if he cuts them.
guardian.co.uk © Guardian News and Media 2009
Tuesday, 31 July 2007
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.”
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.”
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