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OligarchsSeek$78BillionasCreditWoesHelpPutin
(Update2)
ByYuriyHumberandTorreyClarkDecember22,200809:41EST
Dec.22(Bloomberg)Russianoligarchsareliningupfor$78billionofKremlinloanstosurvivethecreditsqueeze,
handingPrimeMinisterVladimirPutintheopportunitytoincreasegovernmentcontrolofthenationsbiggestcompanies.
Just12yearsaftertheygainedownershipoftheformerSovietUnionsindustriesbybailingoutthegovernment,thetables
havebeenturned.Morethan100businessleadersarevyingforloansfromPutinandtheadministrationofPresidentDmitry
MedvedevbecauseRussiancompanieshaveabout$110billionofforeignobligationsduenextyear,accordingtothecentral
bank,doublethetotalowedinBrazil,IndiaandChina.
Businessleaderswhotripledinternationaldebtinthepastthreeyearsareputtinguppartoftheirstockascollateralfor
governmentsupportbecausetheyvebeenhobbledbytumblingcommoditypricesandthebiggestdropintherublesince
Russiasdefaultin1998.PutinalreadyisaidingbillionairesRomanAbramovichandOlegDeripaskaandconsidering
requestsfromDmitryPumpyanskyofpipemakerOAOTMK,OAOSeverstalsAlexeiMordashovandAFKSistemas
VladimirYevtushenkov.

Someofthemwilldefinitelylosetheirproperty,eithertothestateortoinvestors,billionaireAlexanderLebedev,49,said
inaDec.8interview,11daysbeforeDeutscheBankAGdemandedearlyrepaymentofaloanguaranteedby3percentof
MoscowbasedZAONationalReserveCorp.s29percentstakeinOAOAeroflot,thenationalairline.Theyvebeenover
borrowingandsalesoftheircompanieshavebeenfalling.
LoansforShares
Theoligarchs,Russianbusinessleaderswhousedtheirpoliticalinfluencetohelpgainassetsafterthecollapseof
communism,essentiallydictatedthepoliciesthatallowedthemtogaincontrolofthenationsbiggestcompaniesinthe
1990sbyprovidingfinancingtothegovernmentthatwasneverrepaid.
AnatolyChubais,whooversawthegovernmentssaleofassetsthroughthesocalledloanforsharesprogram,saidinan
interviewin2000thattheplanwasnecessarytocreatebigprivatecapitalandhelpthenPresidentBorisYeltsinwin
reelectionin1996topreventareturntocommunism.Chubais,53,isnowchiefexecutiveofficerofMoscowbasedRussian
NanotechnologyCorp.
Vnesheconombank,theRussianstatelenderknownasVEB,isresponsibleforhandlingthebailouts.Inreturnforoneyear
loans,VEBisrequiringarepresentativeatthecompanyandtherighttovetoanydebtormajorassetsale,accordingtothe
banksWebsite.Putin,56,isheadofitssupervisoryboard.Borrowersoffershares,assetsorexportrevenueascollateral.
FewerOligarchs
Itsextremelyunlikelytheyllallbeabletorepayinayear,saidZinaPsiola,amoneymanageratClaridenLeuAGin
Zurichwith$220millioninRussianequities.Someoligarchswillnolongerbeoligarchs.
Atleast10ofthe25wealthiestownershavefacedmargincallsfromlenderssinceAugustasRussiasworstfinancialcrisis
since1998wiped$230billionfromthevalueoftheirequity,accordingtodatacompiledbyDeutscheBankandBloomberg.
ProfitsforfourofRussiaslargeststeelproducersaswellasMoscowbasedTMK,thebiggestmakerofpipesfortheoiland
gasindustry,willfallbyabout50percentto$10.5billionnextyearaspricesofthemetalplunge,accordingtoClemens
Grafe,aneconomistatUBSAGinLondon.Thatmayleavethecompaniesunabletopayforanythingbeyondtheir$10.3
billionofdebtin2009.
Iftheyhavetopaythisthentheyhavenomoneyforcapitalexpenditure,nonothing,Grafesaid.
ShrinkingReserves
Prospectsforrefinancingdebtaredwindling.RussiaswarwithGeorgia,a75percentdropinoilandtheworseningcredit
crisisledinvestorstopull$211billionfromthecountrysstocks,bondsandcurrencysinceAugust,accordingtoBNP
ParibasSA.Thewithdrawalsweakenedtherubleby17percentagainstthedollar,forcingthegovernmenttodrain$163
billion,or27percent,fromforeigncurrencyreserves.Therublefelltothelowestlevelinalmostthreeyearsagainstthe
dollartoday.
Russiancompanieshaveabouttwiceasmuchforeigndebtduein2009thanthe$56billiontotalowedbycompaniesandthe
governmentsofChina,India,andBrazilcombined,accordingtodatacompiledbyCommerzbankAGandRBCCapital
Markets.
TheleadersofRussia,KazakhstanandthreeotherformerSovietstatesagreedlastweektoforma$10billionfundtohelp
theireconomiesweatherfinancialturmoil,KazakhPresidentNursultanNazarbayevspressservicesaidonitsWebsite
today,withoutprovidingmoredetails.
StateControl
Greaterstateinvolvementmayreassureinvestors,saidJeromeBooth,headofresearchatAshmoreGroupPlcinLondon,
whichmanages$32billionofemergingmarketassetsincludingRussiancorporatedebt.
ThereslesschanceofmassdefaultsinRussiathaninWesternEurope,Boothsaid.Theresadegreeofstatecontrolin
theeconomyalready,sothiswillbemoreofthesame.
Theprimeminister,sayinghehasnointentionofnationalizingtheeconomy,pledgedonDec.4toofferloansandbuystakes
incompaniesthatsolicithelp,releasingcollateralandsellingbacktheholdingslater.

Putin,whoservedeightyearsaspresidentbeforebecomingprimeminister,provided$12billionofloanssinceOctoberto
companiessuchasthosebackedbyAbramovich,42,andDeripaska,40,andpledged$38billionmore.Thatcoversonlyhalf
theamountsought.AmongtheapplicantsisPumpyansky,44,ofTMK,whichowes$1.7billionin2009,morethanforecast
earnings.YieldsonTMKsdollarbondsdueSeptember2009topped80percentlastmonth.TMKplanstodelaysome
investmentsandisseekingtorefinancewithlongertermdebt,accordingtoanemailedstatement.
DeripaskaSelling
DeripaskaissellingMoscowbasedSoyuzBankandmaypartwithcontrolofinsurerOAOIngosstrakhinMoscow,
Vedomostireportedlastweek.NamedRussiasrichestmanbyForbesinApril,Deripaskacededstakesinautopartsmaker
MagnaInternationalInc.inCanadaandGermanbuilderHochtiefAGtobanksinOctoberafterthestockslostmorethan
halfoftheirmarketvalue.
VEBs$4.5billionloanallowedDeripaskasUnitedCo.Rusaltokeepa25percentstakeinOAOGMKNorilskNickel,
Russiasbiggestmetalsproducer.Afurther$1.8billionwenttoEvraz,thesteelmakerpartownedbyAbramovich.
DeripaskasaidhesseekingtosellstakesinpracticallyallhiscompaniesincludingRusal,theworldsbiggestmakerof
aluminum,topayoffloans,accordingtocommentsintheWallStreetJournalconfirmedbyspokesmanSergeiBabichenko
today.DeripaskasaidhehopestohavenewinvestorsinthecompaniesbyendofMarch.
Sistema,Evraz
YevtushenkovsSistemainMoscowmayseekasmuchas$2billionfromMoscowbasedVEBtopaydebtsnextyear.
MoscowbasedEvrazandCherepovetsbasedSeverstaldidntrespondtorequestsforcomments.
Notallofthemaregoingtobehelpedout,saidKieranCurtis,whohelpsmanage$787millioninemergingmarketdebtat
AvivaInvestorsLtd.inLondon.Imnotconvincedweknowwhoisgoingtogetstatefundsandthatwillbeamajorfactor
intermsofrolloversandredemptions.
VladimirPotanin,thebiggestownerofOAOGMKNorilskNickelshares,maylosethemtothegovernmentwithinayear,
Vedomostireportedtoday,citinganunidentifiedKremlinofficial.Thesharesarepledgedagainsta$3billionloanfrom
statecontrolledlenderOAOVTBGroup.Potaninhasreceivedmargincallsonthedebtafterthestocklostvaluethisyear,
theMoscowbasednewspapersaid.
Withoutarevivalincommoditypricesorstatehelp,someRussiancompaniesriskfailing,accordingtoPacificInvestment
ManagementCo.,whichrunstheworldslargestbondfund.
Itreallydependsonwhethertheycanweatherthestormwithmetalsprices,saidTimHaaf,Pimcoemergingmarketfund
managerinMunich,whohelpsoversee$50billionofemergingmarketdebtincludingRussianbonds.Werevery
conservativeonRussia.
Tocontactthereportersonthisstory:YuriyHumberinMoscowatyhumber@bloomberg.netTorreyClarkinMoscowat
tclark8@bloomberg.net.
Tocontacttheeditorsresponsibleforthisstory:GavinSerkinatgserkin@bloomberg.net
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