Tuesday, 22 April 2008

Medvedev to maintain Putin’s grip

Wall Street Journal - Financial News

Jason Corcoran in Moscow

21 April 2008

Despite a new President, the Kremlin is likely to increase state control of certain sectors

Medvedev has promised to adopt many of Putin’s (pictured) policies

Russia has a new leader, but the indications are that the country’s business community will have to wait for a new political era. President-elect Dmitry Medvedev may be the first Russian leader to have worked in the private sector, but he owes his victory in the March 2 presidential election to the endorsement of his predecessor, Vladimir Putin, and has promised to adopt his mentor’s policy of tightening control of the country’s companies.

Under Putin, the Russian state has consolidated control over large sectors of the economy and several business leaders have been jailed or have fled the country. Record oil prices first brought creeping nationalisation of energy resources but state intervention is spreading to other sectors and the Kremlin is dictating the rules for foreign investors.

A strategic industries bill, which was approved by the Russian Parliament in early April, will extend state control beyond the commodities sectors. Recent raids by security services on the offices of the Russian-British joint venture TNK-BP and attempts by a federal property agency to seize control of Moscow’s privately owned Domodevo airport suggest the goal posts for investors are moving.

Arnab Das, global head of emerging markets strategy at Dresdner Kleinwort, said: “Russia is reasserting itself as a counterweight to the US and economics is a tool in its armoury. Medvedev and Putin will continue to try to balance geopolitical goals with the need to have free and fair markets.

“The statists, rather than the free-marketeers, may seem to have the upper hand now but the integration of Russia into global financial and trading systems is helping the reform agenda despite the backsliding we have seen with the introduction of price controls.”

The strategic industries law, which was passed in the Duma at the beginning of this month, lists 42 sectors that will be categorised as strategic and in which foreign investments will be either prohibited or limited. The law will require non-state foreign investors to receive permission from the Russian authorities to acquire 50% or more of a company. In the oil and gas sectors, limitations are substantially stricter with the limits of participation set at 10% for foreign companies and 5% for sovereign wealth funds. Foreign investors that already own more than 5% of a strategic company will be required to declare their holdings to the Russian Government.

Igor Lebedinets, analyst at Russian bank Renaissance Capital, said: “We believe the adoption of this bill is mainly aimed at increasing the Government’s influence in major sectors of the economy, including mass-media although the internet sector is excluded from the list. We have a negative view of the bill because we think it might create additional bureaucracy barriers for foreign investment deals and may slow growth in these industries.”

The list has expanded since 2005, when Putin first ordered the legislative changes. In addition to defence, energy, aircraft and aerospace industries, and critical infrastructure – all of which have long been deemed strategic – the legislation accounts for nanotechnology, fisheries and the late inclusion of mobile telecommunication.

The Government says it needs to resuscitate strategic sectors that have suffered from a lack of investment since the collapse of the Soviet Union, but critics argue the policy is anti-competitive and will dissuade foreign direct investment.

Bankers say investors are aware of the state’s increasing role in designated strategic sectors and that the potential benefits of gaining exposure to a country enjoying a prolonged economic boom – where annual gross domestic product is forecast at 7% in 2008 – outweighed the political risks.

Ivailo Vesselinov, senior economist at Dresdner Kleinwort, said: “Foreign companies involved in oil and gas are well aware of the risk factors involved and of the existence of an environmental regulator who monitors the industry, but on a risk-adjusted basis they realise there is nonetheless a lot of profit to be made on the ground.”

Steven Hellman, head of client coverage in Russia for Credit Suisse, said national sponsorship of select industries, or even re-nationalisation, can be positive in the short term if it encourages investment in underdeveloped sectors of the economy. He said: “The technology and automotive industries would be examples. Of course, this must be done in a manner that is fair to all shareholders and there comes a point when market forces should be allowed to take over to ensure efficient development for the future.”

The apparent renationalisation of Russia’s resource sector was a recurring theme during the Putin presidency.

State-controlled gas company Gazprom flexed its muscles last year by taking control of Sakhalin-2, Russia’s largest combined oil and natural gas development, after a campaign against foreign operator Royal Dutch Shell over alleged environmental violations. The Russian-British joint venture TNK-BP is this month likely to finalise the sale of its stake in the Kovykta gas field to Gazprom. TNK-BP, co-owned by BP and a group of Russian billionaires, has been subject to speculation that the Kremlin wants the Russian owners to sell their stakes to a state organisation to let the Kremlin tighten its grip on the energy sector.

Analysts interpreted a recent search of TNK-BP’s offices by the Federal Security Service and the arrest of an employee on suspicion of industrial espionage as signs the Government is increasing pressure on the owners to sell. Russia’s Federal Migration Service said it was not conducting a concerted effort against UK energy group BP, which recalled its 148 foreign employees because of “a lack of clarity over their current visa status”.

Home-grown energy companies and their oligarch owners have also come under the spotlight of resource nationalism.

The Kremlin is seeking the extradition from the UK of Mikhail Gutseriyev, the owner of the oil company RussNeft, who fled Russia last year after accusing the state of forcing him to sell his company through the levying of politicised tax charges.

The RussNeft case echoes that of the oil group Yukos, which ceased to exist from last November following the carve-up of its assets during the summer and the continued incarceration in Siberia of its former owner Mikhail Khodorkovsky on tax evasion charges.

Nick Jordan, head of Lehman Brothers’ Russian operation, said that the apparent renationalisations have involved acquisitions of assets at fair market value. As head of investment banking at Deutsche Bank, Jordan was involved in advising Gazprom on its bid to acquire the Yukos production asset Yuganskneftegas. An auction was later held and Yuganskneftegas was sold for $9bn (€5.7bn) to Rosneft, a rival energy company.

In an interview with Financial News, Jordan said: “The transition from communism to what we have at present has not been perfect but there has been an overly strict focus on this Russian transition. I would say it is fairer to compare the natural resources sector with its emerging market peer group. Look at the Middle East and Latin America and how many of those companies have been sold to foreigners or are public.”

Jordan, who also advised Gazprom-Media on its successful campaign to seize control of independent television station NTV, believes the term renationalisation has been used loosely in Russia.

He said: “It is a term that has been used rather generally here for a number of years. In almost all cases where a company has been brought back under Government control, it has continued to reissue shares to the public or has retained its public share ownership, which means it is not nationalised in technical terms. In each case there has either been an acquisition at fair market value or there has been a local legal process”

In the latest tug-of-war over private assets, East Line, the owner of Moscow’s Domodevo airport, is fighting an attempt by the Federal Agency for Federal Property Management to nationalise some of its assets. The agency claims the terminal was illegally privatised a decade ago. Das said foreign investors and politicians are right to adopt divergent views of such attempts by the state to reclaim prized assets. He said: “Whether renationalisation is creeping or galloping in Russia, it is bad news for what the country wants to achieve economically. The International Monetary Fund, the World Bank and the US Treasury are right to view what is happening in prescriptive ideological terms.

“That is what they are there for, just as bankers and businessmen are right to reconcile what is happening as a function of the state and part of the economic cycle, and should be expected to position themselves to do business in that context.”

The sky’s the limit for Moscow’s finance district

Wall Street Journal - Financial News

Jason Corcoran in Moscow

21 Apr 2008

Building boom is driven by desire to be Europe’s highest, fastest and most diverse

A forest of cranes breaks up the skyline and dust clouds billow from numerous digs. Much of the 200-acre site for Moscow City – a vast development three kilometres west of the Kremlin on the banks of the Moscow River – is still a building site, but it is filling with residents.

The pioneers set up in Moscow’s version of Canary Wharf in the city’s Presnensky District, or Presnya, more than two years ago. Now the trickle of banks, funds, lawyers, accountants and corporates pitching their offices in the business district is turning into a flood.

The idea behind Moscow City is to create the first zone in Russia that will combine offices, hotels, apartments, restaurants, shops and entertainment centres. It will have about 20 skyscrapers, with at least seven buildings taller than any now in Europe.

A hedge fund executive who works in the completed Tower 2000 in Moscow City has bought an apartment on the 75th floor of Federation Tower, a twin-tower multi-functional skyscraper that will reach 93 floors and a height of 1,161ft. From his office, he has a bird’s eye view of the construction.

He said: “It is exciting to watch the scale of the development from here. State-run bank VTB is moving soon into Federation Tower soon and rents are going to shoot up. I got in early and the price of my place has gone up from 17,000 roubles (€458) per square metre to 25,000 roubles per square metre in a few months.”

Buildings I and II of the Naberezhnaya Tower complex are operational and are home to international corporations Procter & Gamble, IBM, Citibank, E.On Ruhrgas, Nortel Networks, Toshiba, General Electric and KPMG. Global fund manager Pioneer Investments is a tenant in Moscow City and US investment bank Lehman Brothers is acquiring office space in Naberezhnaya Tower II.

The site, also known as the Moscow International Business Centre, is split into 20 plots where domestic and foreign investors are putting up buildings designed by their own architectural teams.
At least 19 high-rise multi-functional buildings housing hotels, apartments and offices with a total area of about 43 million sq ft are being built on the former industrial zone.

Dominating the skyline will be the Norman Foster-designed 2,008ft, 118-storey Russia Tower, which will be one of the tallest buildings in the world when it opens in 2012. By contrast, the tallest building in London’s Canary Wharf, One Canada Square, is 800ft high and only 50 storeys.

The mixed-use Russia Tower – incorporating apartments, hotel, office and leisure space – will use an energy-cycle system to regulate power, temperature and hot water.

Construction on what is intended to be the largest building in Europe began last September with completion set for 2012.

Natalia Borontova, head of research at Jones Lang LaSalle in Moscow, said: “The Kremlin and the Red Square are no longer enough to get the whole picture of Moscow. Postcards will soon feature the skyscrapers of Moscow City as well as historical landmarks. By 2012, Europe will have 61 new skyscrapers. It is symbolic that 16 of them will be in Moscow.”

Oleg Deripaska, Russia’s richest man with a fortune estimated by Forbes Russia of $40bn (€25.2bn), has been the main developer at Moscow City though his Basic Element holding company.

Deripaska built Moscow City’s Tower 2000 building, which has floor space of 32,292 sq ft, and the Bagration Bridge which straddles the Moscow river.

Deripaska’s companies owned 90% of Moscow City after he purchased the 47% previously owned by Mikhail Prokhorov, one of the co-owners of metals conglomerate Norilsk Nickel. Reports in the Russian press suggest Deripaska has since done a deal to sell 50% of his Moscow City interests to the construction company Mirax Group.

Another Russian developer, Mos City Group, is behind the construction of the Imperia and the Eurasia skyscrapers, and the Yuri Dolgorukiy.

The 60-story Imperia will consist of two buildings, an office and retail complex and a glass-domed Aquapark entertainment centre. The 67-floor Eurasia will house offices, apartments and a recreational area, while the Yuri Dolgorukiy Tower with its east-meets-west inspired design will have a hotel and exhibition centre.

MCG is wholly owned by Pavel Fuks, a Russian businessman who has been involved in banking and manufacturing since 1995.

He said: “Nearly everything we build is large multipurpose complexes that consist of both residential and commercial properties. Gains from selling residential part enable us to complete construction of the entire complex while revenues from leasing out commercial properties are our profit. This facilitates the construction financing.”

MCG is planning to list 20% of its stock in a $1bn flotation on the London Stock Exchange later this year to help find additional funding for its projects.

Despite the fact that the amount of office space in Moscow is below the European average, Borontova said: “Moscow is leading the way in terms of construction speed. If it took Canary Wharf 20 years to construct one million square metres of office space, the same volume will be erected in Moscow City in less than seven years.”

The project enjoys the full backing of Moscow mayor Yury Luzhkov and the city council, which recently passed a ruling granting the area free economic zone status, and providing preferential tax treatment to all enterprises leasing office space there.

However, despite this financial inducement, prospective tenants still have to overcome the lack of infrastructure within and linking Moscow City to the rest of the capital. The complex, which will have a large open plaza roughly the size of Red Square at its centre, is expected to attract about half a million people daily. Additional metro stations and rapid transit systems linking Moscow City to Sheremetyevo-2 and Vnukovo airports are yet to be built.

Brady Martin, senior analyst at Alfa Bank, believes decamping to Moscow City is “a prestige play” rather than a sound business decision at the moment.

He said: “Initial building occupancy is quite high but when will the rest catch up? Parking is also nearly non-existent and there are other business areas, like Paveletsky, anyway which are being built nearer to the centre."

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.

Regulator tells exchanges to create single platform

Wall Street Journal

Jason Corcoran in Moscow

21 April 2008

Rybnikov: market users have a say on how infrastructure is set up

Merger could increase turnover sevenfold

Russia’s two largest stock exchanges are a step closer to being merged into a single trading platform following renewed efforts by the market’s main regulator to help develop Moscow as a global financial centre.

The Federal Service for Financial Markets will next month submit plans to the Government to merge the rouble-denominated Moscow Interbank Currency Exchange, Micex, and the dollar-denominated Russian Trading System Stock Exchange by 2010. The regulator believes the combined turnover of the exchanges could grow sevenfold by 2020 to 210 trillion roubles (€5.7 trillion) annually following the merger.

The regulator will propose that Micex and RTS become units of a holding company, whose shares would later be offered to the public. In an interview with Financial News, Alexei Rybnikov, the chief executive of Micex, confirmed the merger talks and said he was confident of success in spite of numerous obstacles.

He said: “We have many stakeholders involved in the affairs of the securities market infrastructure. The state is a regulator and also a shareholder both directly and indirectly in the infrastructure. In addition to the existing shareholders of the Russian exchanges, market users also have a say and their own view on how infrastructure is to be set up. The question is whether a model exists that can accommodate all these different interests and various stakeholders. I do think such a model exists.”

Analysis by Thomas Murray, a risk ratings and advisory specialist, of the vested interests of each platform’s shareholders, users, brokers, foreign and domestic investors and management in such a merger, found that while there may be diverging viewpoints on specific issues, all parties could see synergies from having a single trading platform.

Micex was set up in 1992 by Russia’s central bank, which still owns 28% of the exchange. Other shareholders include state-owned and commercial banks, which also have stakes in RTS. The significant shareholders in RTS are Troika Dialog, KIT Finance, Deutsche Securities and UniCredit Aton, each owning approximately 10% of the exchange.

Rybnikov said: “I think a model that will please all the different interests can be found and, when it is outlined, can be supported by the different stakeholders. But every stakeholder has to define what it wants from the infrastructure.”

A former head of investment banking at JP Morgan Chase in Moscow, Rybnikov has been head of the largest Russian stock exchange since its launch in November 2003. From 2002 to 2004 he was also director of the National Depository Centre, Micex’s settlement depository.

It is the creation of a central depository that lies at the heart of any merger between the two exchanges. NDC and RTS’s Depository Clearing Company have been battling for years for the title of pre-eminent central clearing company. The Government plans to set up a central depository, but the politics of choosing one depository to form the base of the single company have been a stumbling block.

Vladimir Milovidov, head of Russia’s market regulator the FSFM, told the newspaper Kommersant that the formation of a central depository was inevitable because having two institutions caused inefficiency and illiquidity and was more expensive for investors.

The FSFM has outlined a draft strategy for the development of the domestic capital markets over the next four years. Among the proposals are drastic changes to the tax rules, including cutting capital gains tax and a reduction of the tax on income from investments in securities, which the regulator hopes will encourage more companies to list their shares in Russia rather than going overseas.
The regulator has introduced several administrative controls to encourage corporates to list locally with only partial success – Russian companies that launch initial public offerings typically list both in Russia and London.

Liquidity has increased significantly, however, with average daily volumes of all Russian stocks reaching almost $6.2bn (€3.9bn), including $1.2bn of daily over-the-counter trading, according to Troika Dialog research. Roughly 45% of this trading takes place on Russian exchanges, 19% is OTC volumes in Russia and 36% is traded internationally. The inclusion of OTC liquidity adds considerably to the number of stocks that are liquid enough to merit investor interest, said Troika (see bar chart).

Rybnikov believes a deepening pool of liquidity will tempt more Russian issuers to list at home. He said: “For a global company, a foreign listing helps to create acquisition currency for potential transactions, there are also reputation and visibility-related issues that count. On top of that, the global investment banks that underwrite Russian IPOs also have most of their clients outside Russia. But as the domestic investor base grows and the competitiveness of Russian brokers grows, we will see more Russia-only listings.”

Rybnikov and other marketmakers are confident Russia can become a hub for the capital markets of the Commonwealth of Independent States and central Europe after necessary reforms.

The Russian parliament is considering legislation to allow foreign securities to list on domestic exchanges for the first time. It wants to better compete against Poland’s Warsaw Stock Exchange, which is establishing itself as a regional player having won listings from Ukraine and other former Soviet states.

Rybnikov said: “We have a lot to offer issuers from the CIS countries, not only in terms of the Russian investor base and the depth of the domestic market, but also due to the size of the foreign investor base that uses our platform.”

Such is the level of Russian corporate interest in the capital markets that Germany’s Deutsche Börse set up the first office of any foreign exchange in Moscow last year. However, the exchange group shot itself in the foot when a member of its executive board wrote to a Russia foreign policy adviser discussing a potential development with Micex to launch an equity trading and listing platform in Frankfurt.

Discussions were at an early stage and the letter to a policymaker is understood to have dismayed the Russians.

Rybnikov said: “The idea of creating a platform outside Russia in EU jurisdiction, where Russian stocks can be traded and settled more efficiently then elsewhere, is interesting. But it creates risks for our existing business. Because our goal is to get as much liquidity on Micex as possible we risk creating competition for ourselves. Hence, that idea is to be looked at with caution and will have to be studied in detail before it gets a go-ahead.”

Monday, 21 April 2008

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.

Sunday, 20 April 2008

VTB stages fresh Russian raid on Deutsche Bank

Financial News

Jason Corcoran in Moscow
16 April 2008

Russia's second largest lender, VTB, has poached 10 bankers from Deutsche Bank in Russia in its second raid on the German institution's Moscow operation.

The bank, which is setting up its own investment banking arm in Moscow, London and Singapore, has recruited personnel for management roles and positions in fixed income, equity sales and research. VTB confirmed the hires, while Deutsche confirmed the departures.

Investment banking sources said Deutsche has been "fighting tooth and nail" to retain staff and had been successful in keeping some people who were believed to have been offered jobs by VTB. Bankers in Moscow suggested as many as 40 bankers were leaving.

"What's actually quite impressive is that Deutsche have fought back and have retained people but VTB virtually has a blank cheque book and they couldn't prevent a number going," said a banker.

Andrey Girichev, head of equity trading for Russia/CIS at Deutsche, joins VTB in Moscow as co-leader of its new equity sales operation.

Nikolai Donzov will become chief operating officer and Svetlana Fedorenko financial director.

Vitaly Buzoverya has been appointed as the co-leader of the department of commercial operations for fixed income products. He will be responsible for the activity on the global markets for capital in Russia and the CIS, including trade in currencies, interest rates, derivative tools, bonds and structured financing. Aleksey Ivanov has been hired as his deputy.

Alexey Yakovitsky, previously hired from Deutsche, has been named as head of research. His team includes three of his former colleagues.

Alexandr Pukhaev will head the analysis of the industrial sector of metallurgy and ore extraction. Dmitry Dmitriev will head the financial and fixed income sector.

Elena Sakhnova will head the coverage of the transport sector, machine building, chemical and construction sectors.

Also arriving from Deutsche are Ekaterina Barinova as director of human resources and Alexey Emilyanov as director of IT.

The resignations are the latest to hit Deutsche Bank. Last month it suffered high-profile resignations after deputy head of its Russian business, Yuri Soloviev, left for to state-owned VTB, along with Victor Makshantsev, head of real estate and infrastructure and Alexei Zabotkin, its chief strategist and Yakovitsky, its head of research.

Financial News revealed that Charlie Ryan, chief executive of Deutsche Bank in Russia and a co-founder of UFG, Deutsche Bank's Russian business, could also join the exodus when his contract expires in the autumn. Discussions on renewing his employment with the business are yet to get underway.

Ryan was one of the co-founders of UFG along with former Russian finance minister Boris Fedorov and Ilya Sherbovich, Deutsche's former head of investment banking in Russia, who left last year to found his own Moscow-based advisory and investment boutique.

Deutsche this month hired Alexander Pugovkin from Renaissance Capital as international sale trader and Sergey Suverov as senior equity sales director from Citibank.

A spokeswoman for VTB said it had so far hired 15 bankers from Deutsche.

Thursday, 10 April 2008

IPO to raise cash for Moscow skyscrapers

Financial News

April 7, 2008

Jason Corcoran in Moscow

Russian property developer Mos City Group is planning a flotation on the London Stock Exchange in the autumn to help fund the building of skyscrapers in Moscow's new Canary Wharf-styled business district.

The offering, part of a growing trend for Russian property companies to list in London, could raise up to $1bn (€636m) or 20%.

MCG is owned by Pavel Fuks, a Russian businessman who has been involved in banking and manufacturing since 1995. In early 2000, he focused on property development. The firm, which is this year aiming to list 20% of its stock on the London Stock Exchange, is building three towers in Moscow City (right), the emerging business district in the Capital's Presnensky region.

The concept of Moscow City is to create the first zone in Russia that will combine business activity, living space and entertainment. Three metro stations and a rapid transit system linking it to Sheremetyevo-2 airport are also being built.

The project enjoys the full backing of Moscow Mayor Yury Luzhkov and the city council, which recently passed a ruling granting the area free economic zone status, and providing preferential tax treatment to all enterprises leasing office space there.