Senator from Tuva Sergei Pugachev has got a chance to avoid the revocation of the license of the International Industrial Bank (“IIB”) controlled by his family. As it became known, the structures of United Industrial Corporation (UIC), also controlled by Mr. Pugachev, agreed with VTB and Severstal on basic parameters of the loan which is aimed at payment of the obligations of the IIB to customers. They are willing to give the loan of $ 480 million to the UIC in equal shares for a period of six months at 20% per annum in foreign currency on the security of Elegest coalfield in Tuva. Thus, the field itself will come under control of Severstal. According to the market participants, the agreed amount of the loan will not allow IIB to pay its obligations.
The fact that the structures of the UIC might get a loan before the end of this week secured by shares of the Yenisei Industrial Company (which owns the license to develop Elegest coalfield in Tuva), a source close to the negotiations between VTB and key creditors of IIB claimed. According to him, the parties reached a general agreement on the basic parameters of the loan of UIC, which size will be $ 480 million. “A loan for a period of six months will be given in equal shares by VTB and Severstal, under which control the deposit will be moved," the interlocutor of Kommersant says. Moreover, he noted that the structures of Mr. Pugachev will get only $ 100 million in hard cash out of Severstal’s share of $ 240 million. The remaining $ 140 million is the duty of IIB to Severstal, which had previously stored deposit in the IIB; its term will be prolonged for another six months. According to a source of Kommersant, the credit rate will be 20% per annum in foreign currency. Separately, he stressed that the Central Bank is aware of the agreements reached, because the negotiations of the parties had been conducted in close contact with the Bank of Russia." The most UIC and VTB do not gibe any comments officially, but sources in the corporation confirmed that "negotiations are in final stages."
The agreed parameters of loan are less than UIC expected to receive. Let us recall that the corporation intended to borrow $ 600 million in VTB for a period of approximately six months at 13% per annum. During this time, the structures of Mr. Pugachev are going to sell 75% plus one share of the Yenisei Industrial company. The Japanese Mitsui and Chinese Shenhua are called among the potential buyers - UIC clarify that the list of candidates "is much broader." According to Kommersant’s source in UIC, negotiation about the sale of the asset is led by Credit Swiss as an advisor, "neither VTB, nor Severstal is involved in the negotiation process." Operative management may involve the direction of cash flows by Elegest for the duty repayment of the UIC to "Severstal", the analyst at Renaissance Capital, Boris Krasnozhenov assumes, adding that in August about 50 tons of coal were produced in Elegest. The mine can not go to "Severstal" for the debts fully: the cost of Elegest (according to analysts, it is more than $ 1 billion) is not comparable to the amount of debt ($ 140 million). "Severstal" can not draw investors neither, because the owner involved in the sale of the asset, according to Boris Krasnozhenov.
It was assumed that the loan received by UIC would help IIB solve the problems, in particular, to maintain a banking license. Let us recall that the problems in the Empire by Sergei Pugachev began in June when the agency Fitch Ratings changed rating of IIB from positive to negative by questioning the bank's ability to carry out payments on Eurobonds amounting to ? 200 million. Subsequently, the ratings of IIB declined several times up to the pre-default level. On June, 16 and 23 the bank was unable to make regular payments on unsecured loans of the Central Bank. On July, 5 Board of Directors of the Central Bank approved a debt restructuring by IIB on unsecured loans to 32 billion rubles for a period of six months on bail of shipbuilding assets of UIC (88% stake in the Baltic Shipyard, 72.23% stake in Severnaya Verf and 75.81% of OAO "CKB" Iceberg", now the senator is negotiating the sale of the assets of United Shipbuilding Corporation). On July, 6 IIB announced default on Eurobonds for ? 200 million maturing on that date.
Simultaneously, the bank had cross-default on Eurobonds for $ 200 million maturing in 2013. However, the restructuring was offered only to holders of the issue, denominated in euros. On July 21, holders of Eurobonds in 2010 approved the restructuring of the debt on these shares for one year. Bank paid them a coupon - 9% of the debt and 5% of the amount owed to the creditors who agreed to the restructuring prior to July 14. During the period from July 1, about ten lawsuits were filed by companies requiring a refund. The biggest claims (at 4.1 billion rubles) are against Severstal, the second-biggest sum claimed in the court is by the creditor of IIB – OKB Sukhoi (3.95 billion rubles)..
Market participants believe that the agreed loan amount of $ 480 million will not solve all the problems of IIB. "The amount of the loan is just a third of the debt of IIB to the Central Bank (32 billion rubles), analyst Moody` s Elena Redko says. In view of the total outstanding liabilities of IIB that is a very small amount. At the moment, getting these loans will allow the bank to "broaden" the current roster and maintain interest on liabilities, but long-term liquidity problems will not be solved. While the bank's loan portfolio is not extinguished, as evidenced by the increase of accrued interest, the liquidity problems will not be solved." The bank receives only $ 340 million in hard cash, of which, apparently, about $ 140 million immediately goes to OKB Sukhoi, and the rest of the depositors receive another $ 100-150 million, as analyst at one of the investment banks estimates. "There are $ 50-100 million free. Out of this sum a trench to the Central Bank has to be paid in September under the restructured loan in the amount of approximately $ 70 million (previously, citing its sources, DebtWire agency indicated that the monthly payment of IIB to the Central Bank on the restructured loan is 2.5 billion rubles.). The remaining money can cover the interest only ", the interlocutor of Kommersant noted.
Source: Kommersant № 176 (4476) on 23/09/2010