Page 108 - RusRPTDec18

by Cyprus-registered Riverstretch Trading & Investments (RT&I), reportedly affiliated with state-controlled Rosneft oil giant.
However, the Moscow Arbitrage court cancelled RUB34bn worth of deals between FC Otkritie and O1 that took place shortly before Otkritie's the bail out (RUB4bn worth of loans extended to O1 and RUB30bn of its unsecured bonds collateralised in the bank). The court also recovered the bank's right to 35% in O1 Properties' as collateral against the loans.
It is not clear how Otkritie's ownership in O1 will influence the bondholders of one of the largest owners of office spaces in Moscow. Otkritie is controlled by the CBR, is slated to merge with Binbank (aka B&N Bank), with over RUB2 trillion of bad assets from its and other bailed banks to be pulled into a "bad assets" fund.
The bond issues of O1 carry a change-of-control clause and the change of ownership (with RT&I and Otkritie) gives the right to its creditors to call for immediate repayment of most of company's debt. According to Vedomosti, the bondholders are set to meet on November 19.
The Zarenkov family might sell most of its stake in Etalon to Sistema, according to a Vedomosti report on November 7. Etalon is Russia's fourth largest developer, with 423,000sqm of completions in 2017 and 1.1mn sqm under construction at the moment. As of 30 June 2018, Etalon’s total group project portfolio stood at 2.7mn sqm. The Zarenkov family is a key shareholder, with 31% as of the same date (with 3% belonging to management, 6% to Baring Vostok and the remaining 61% in free float). “Uncertainties about the shareholder structure have become a significant headwind for Etalon's investment case of late, with the stock down 26% YTD amid robust operating results. As of yesterday’s close, Etalon’s market capitalisation was $622mn while the value of the Zarenkov family’s stake was $191mn. The current p/nav is 0.3x vs. LSR’s 0.4x, both of, which we consider to be fundamentally undervalued,” VTB Capital (VTBC) said in a note. The paper cited its sources on the potential purchase of a stake of just below 30% to avoid a mandatory tender offer for Sistema. The latter is already present in the development segment, with its subsidiary Lider. Its flagship projects include Zul-ug (1.7mm sqm) and Nagatino (472,000sqm). A recent ban on pre-selling apartments has change the nature of the business in Russia and favours the very biggest developers that can command the most attractive financing terms from banks. The change in regulation was designed to improve the security of buyers who have been ripped off in the past. The change is also expected to drive consolidation of the sector as the smaller players look to exit to the incumbents.
9.2.5 Retail corporate news
The multi-industry investment conglomerate AFK Sistema could sell a controlling stake in Russian children's goods retailer Detsky Mir to the Safmar group of Mikhail Gutseriev, Vedomosti daily reported on November 28 citing sources close to the deal. Detsky Mir is one of anchor assets of Sistema, but its SPO in 2017 and March 2018 was scrapped due to legal battle between Russian oil major Rosneft and AFK Sistema. Commenting on solid results of Sistema showed in 2018, analysts anticipated Detsky Mir sale to be the next catalyst for the stock. A stake in the company is a sought after asset as the brand is beloved from the Soviet era and an iconic household name, while the
108 RUSSIA Country Report December 2018 www.intellinews.com