Tuesday, April 30, 2013

Norway, Qatar and Azeri Sovereign Wealth Funds Buy Into Russia's VTB

Russia's second-largest lender VTB Bank (VTBR.RS) said Monday its secondary public offering, scheduled for May, attracted demand from the sovereign wealth funds of energy giants Norway, Qatar and Azerbaijan.


VTB said in a statement it received "firm and binding commitments" from existing and new shareholders, including bids from Norges Bank Investment Management, Qatar Holding LLC and the State Oil Fund of Azerbaijan.

VTB is planning to issue 2.5 trillion of new ordinary shares worth 102.5 billion rubles ($3.23 billion) to meet capital adequacy targets and provide funding for the continued growth of the business.

Demand for VTB shares from all the three sovereign funds could be driven by the commodity-focused nature of these economies along with interest in liquid shares of major issuers, said Natalia Orlova, chief economist at Alfa Bank.

"They understand the oil environment, it creates a rather comfortable situation for them," Ms. Orlova said, referring to Russia's focus and dependence on commodity markets.

The bank's existing shareholders will have statutory pre-emptive rights to buy new shares at RUB0.041 per share on the Moscow exchange between May 6 and May 17, the bank said.

The issue of new shares will boost VTB's Tier 1 capital ratio and total capital ratio to around 11.9% and 16.3%, respectively, increasing the overall lender's capital by 24%.

VTB also said that the stake of the Federal Agency for State Property Management is set to drop to 60.94% from 75.5% following the placement of new shares.

This is in line with the Kremlin's plan to gradually cut government stakes in the country's key companies by listing their shares on the Moscow exchange.

This year the government plans to privatize stakes in major companies, including diamond miner Alrosa (ROSA.RS) and tanker fleet Sovcomflot, which together with VTB Bank could generate at least RUB427 billion, according to economy ministry estimates.

In September, the government sold a 7.6% stake in VTB's closest rival and the country's largest lender, OAO Sberbank (SBER.RS), through a secondary public offer for $5.1 billion.

foxbusiness.com

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