MOSCOW, June 29 (RIA Novosti) Abramovich repays $3 billion to Khodorkovsky/Russia looks forward to money repatriated from China /LUKoil to exchange 10% of its shares for assets in South America/Yukos assets sold off at $100 billion discount/Russian investment bankers want to earn $2-$3 million annually
Gazeta.ru
Abramovich repays $3 billion to Khodorkovsky
Millhouse Capital, a company owned by Russian billionaire Roman Abramovich, has signed an amicable agreement with bankrupt oil company Yukos, formerly owned by Mikhail Khodorkovsky. The agreement closed the deal on the merger of Sibneft and Yukos.
That prompts the conclusion that the mysterious company Prana, which bought Yukos real estate, is controlled by Abramovich, who has decided to repay debts to his former partner.
Under an agreement signed in late 2003, Yukos, which then led the Russian oil market, merged with Sibneft, owned at the time by Abramovich.
Yukos bought a 92% stake in Sibneft for $3 billion and 26% of its own shares, which it turned over to Millhouse Capital. However, Khodorkovsky was arrested almost immediately after the deal.
It is difficult to say why Millhouse decided to cancel the deal. There may be a direct connection between Khodorkovsky's arrest and the termination of the merger, or the decision could have been made within the Kremlin administration, which had previously approved the merger.
The two companies spent years debating the issue. Millhouse won back a 72% stake in Sibneft, leaving only a 20% share package to Yukos.
It soon sold the 72% stake to natural gas monopoly Gazprom for $13 billion, and Sibneft was renamed Gazprom Neft.
In short, Millhouse regained and resold Sibneft without returning the $3 billion to Yukos.
Sources connected to Yukos said the agreement was reached on condition that the $3 billion would be returned to the bankrupt company through the acquisition of its assets at an auction.
Experts valued Lot 13, which included Yukos's headquarters in Moscow, at $1 billion, but Prana paid four times that sum for the assets, outstripping Neft-Aktiv, a 100% second-tier subsidiary of state-controlled oil company Rosneft.
Rosneft is currently negotiating the purchase of the lot from Prana.
One way or another, Yukos has received its $3 billion.
Kommersant
Russia looks forward to money repatriated from China
Foreign investors no longer fear that the crisis on the Chinese stock market might become global. In response to yesterday's fall in stock indices in China, they bought long on stock floors elsewhere in the world.
By gently deflating the speculative bubble, Chinese authorities have effectively allowed investors to repatriate their capital from the country without pain. The winners are underestimated markets, above all in Russia.
So far, most of the foreign investments repatriated from China have been missing Russia. As estimated by Emerging Portfolio Fund Research, in the week ending June 20 funds which invested in Russia and CIS countries received $31 million in inflows. During that period, about $120 million was taken out of China.
Capital flight from China is already in its sixth week, and the total amount repatriated so far is nearly $3 billion.
In the same period, outflow from Russia was $37 million. According to analysts, the repatriated money has found a home in Latin America or developed countries.
However, analysts have found the Russian market attractive. When funds have high profits on some markets, they turn to profit taking, and re-invest in non-growing markets, said Florian Fenner, managing partner at UFG Asset Management.
According to Uralsib finance corporation analyst Anton Tabakh, Russia's share market posted the same growth last year as Venezuela's, "although the political risks here are considerably lower."
Also, the stock of Russian companies looks fundamentally undervalued. Tabakh said that was particularly true of oil and gas stocks, which trade 30% to 70% below their actual market value.
"That stock was aggressively sold in the spring, amidst increasing political risks," the analyst said. As a result, a huge growth potential has emerged, making stocks attractive for investment.
Gazeta
LUKoil to exchange 10% of its shares for assets in South America
The managers of Russia's largest private oil company LUKoil have received another opportunity to attract funds. The shareholders' amendments to the company's charter make it possible to attract about $7 billion through an additional share issue.
Experts said the funds would most probably go into projects in Venezuela.
The general annual shareholders' meeting held yesterday (June 28) took the decision to make amendments to the company's charter. They concern the endorsement of the provision on 85 million declared shares (10% of the authorized capital, at a nominal price of 2.5 kopeks per share).
These amendments will allow the LUKoil board to take prompt decisions on the placement of an additional share issue as an alternative source of financing.
Considering the oil company's current market capitalization (about $70 billion), an additional share issue may raise about $7 billion for LUKoil. At the same time, the charter's new provision makes it possible to dilute the company's shareholding (at present, about 40% of the company's shares is controlled by its management).
"We guarantee that these funds will bring at least a 15% return on the invested capital," LUKoil's head Vagit Alekperov assured the shareholders yesterday.
Experts said projects in Venezuela are the most probable sphere for the company's investment.
At present, the company is completing additional exploration on the Junin-3 bloc in the Orinoco basin and negotiating the establishment of a joint venture with the Venezuelan national oil company PDVSA to conduct well rehabilitation.
It has not been ruled out that the establishment of the joint venture topped the agenda at Vagit Alekperov's meeting with Venezuela's President Hugo Chavez held yesterday.
Leonid Fedun, LUKoil's vice president, assumed yesterday that "Venezuela may raise the issue of accelerating these processes."
According to numerous statements made by LUKoil's top managers, the company is interested in expanding its presence in Latin America.
"Venezuela possesses huge oil reserves which exceed even Saudi Arabia's indicators," Fedun said. However, the reserves "are difficult to extract and their oil is extra heavy."
Business & Financial Markets
Yukos assets sold off at $100 billion discount
Experts have said bankrupt oil giant Yukos has repaid all its debts, selling assets at a $100 billion discount, and that the case could be considered closed unless new lawsuits are filed.
As of May 11, Yukos's debt to creditors totaled $27.5 billion, with 137 claims from 63 creditors. A total of 15 lots worth over 818 billion rubles ($31.5 billion) were auctioned off.
On Thursday, Russia's chief bailiff and Federal Bailiff Service director, Nikolai Vinnichenko, said Yukos debts had been virtually repaid through asset sales.
That same day, the federal budget and state-owned oil company Rosneft received 151 billion rubles ($5.85 billion) and 237 billion rubles ($9.19 billion), respectively.
The Finance Ministry said it expected the budget to receive up to 450 billion rubles ($17.45 billion), and that the money would be used to build roads, overhaul the housing and the municipal sector, and finance development institutions.
Timur Khabitsov, an analyst with Finam brokerage, said Yuganskneftegaz, formerly the main Yukos production unit, had been sold for $9.35 billion, while a total of $40 billion had been paid for all of the company's assets.
He said Yukos's market capitalization reached an all-time high in 2003 and exceeded even that of energy giant Gazprom.
In late 2003, Yukos's capitalization totaled $27.75 billion, while Gazprom was worth about $26.5 billion. Khabitsov said that given the capitalization of other oil companies, Yukos would now be worth about $140 billion.
Stanislav Kleshchev, an analyst with retail bank VTB 24 owned by Vneshtorgbank, said a company similar to Yukos in 2003 would now be worth over $100 billion.
He said global oil prices had soared from $30 to $70 per barrel since 2003, and that oil deposit volumes had been reassessed.
"Moreover, the companies pocketed most of the profits prior to the adoption of new severance-tax legislation," Kleshchyov told the paper.
Vedomosti
Russian investment bankers want to earn $2-$3 million annually
Numerous IPOs and a growing number of mergers and acquisitions on the Russian market have increased the incomes of investment bankers by 50% in 2006. It has now become almost impossible for an investment bank to hire a top manager for $0.5-$1 billion.
"Publications on the issue have encouraged top managers from New York and other cities to call Russian banks, because they think huge sums of money are paid here for nothing," said the leader of a headhunting agency.
In fact, requirements to specialists are very tough.
Yiannis Demopoulos, head of Delta Executive Search, which specializes in the financial services sector, said Russian companies need top managers with experience on the Russian market, thorough knowledge of potential clients, and world-class skills.
There are few such specialists, and therefore it is not surprising that their salaries went up 100% last year, according to Demopoulos.
Olga Selivanova, a partner with the Morgan Hunt agency, said their salaries went up 30%-50%.
The growth of the market is another factor encouraging the growth of salaries. Investment banks earn the most from initial public offerings.
According to Mergers.ru, a company set up by the ReDeal analytical group to study the Russian market, 13 Russian companies conducted IPOs in 2005, raising $4.55 billion.
In 2006, 23 companies floated their stock and raised $17.7 billion, and the index of the Russian Trading System stock exchange (RTS) went up 70.7%.
In the past 18-24 months, headhunters for global banks were shocked by the rapid growth of salaries of the top staff of Russian investment banks.
Edward Kaufman, who left UBS to become the head of Alfa Bank's Investment Bank this March, was lured by a promise of $7-$8 million annually, according to a headhunter and a top manager of a Russian investment company.
They said marketing experts from Alfa Bank and Uralsib requested $2-$3 million annually last summer during interviews with Goldman Sachs. The American bank decided it would be cheaper to hire specialists from London.
The incomes of investment bankers will keep growing this year, especially because there are investment banks in Russia without an established team, such as Lehman Brothers and Nomura, Demopoulos said.
At the same time, Alexander Zakharov, deputy director of the brokerage department of the Metropol investment financial company, said the incomes of those who are earning mainly on the stock market could fall.
According to half-year results, the Russian stock market posted only minor growth.
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