Russia's RZD to put off IPOs of subsidiaries to 2011

Updated September 23, 2008

   JSC TransContainer’s IPO planned for 2008-end should have become the acid-test ratio of the investors’ interest in the subsidiaries of Russia’s Russian Railways JSC (RZD). However, the dire condition of the stock market has made the company to put off the placement to 2011. The IPO of another RZD’s subsidiary - RefService - is put off as well. The experts are puzzled concerning the duration of the pause, since, in their opinion, the market will recover earlier. So, at the moment, RZD has to look for other ways of facilities attraction.

   On September, 22, RZD CEO Vladimir Yakunin reported that the company had put off the stocks placement of its affiliates - JSC TransContainer and JSC RefService (specializes in transporting freights in insulated rolling stocks) - to 2011. According to him, the decision is a reaction to the situation at Russia and world’s stock market. "We are not targeted at selling these stock holdings for any price, and we are ready to postpone the transactions for the later term", the senior Vice President of RZD Feodor Andreev added. He marked also that the decision on the sale would be taken on the basis of the situation at the Russian and international financial markets.

   In TransContainer marked that they didn’t receive yet any official documents concerning this issue. Deputy CEO of RefService company Oleg Bogomolov reported that he wasn’t aware of the new decision of RZD’s management. "RZD directors’ board has ratified the sale of 25% plus one stock of RefService within the open auction that will take place at 2008-end. All documents are prepared already, and at the moment, we are waiting for Russia’s government authorization to hold this auction. Moreover, according to our data, as soon as we receive it, the auction will be held", Mr. Bogomolov explained. In RZD refused to comment further.

   TransContainer JSC should have become the first RZD’s affiliate to separate. Three stages of placing company’s stocks were announced: the private placement, the IPO on MICEX (Moscow Interbank Currency Exchange) and RTS (Russian Trading System) and the sale of additional issue of stocks and RZD’s stock holding (it should have reached 51% by this moment). The private placement has been held already: at the beginning of this year, about 15% of TransContainer stocks were sold to the EBRD (European Bank for Reconstruction and Development ), Moore Capital Management, LLC, GLG Emerging Markets Fund and Troika Dialog Investments Limited. Thus, Mr. Andreev said earlier that in 2009, TransContainer intended to place 14-19% of stocks at the London Stock Exchange (LSE). At the end of the previous year, the deputy head of the Ministry of Economic Development and Trade (MEDT) Kirill Androsov said that RefService would hold its IPO in 2008.

   The experts were not surprised at Mr. Yakunin’s decision, and specified that there wasn’t any sense to hold IPOs considering the dire market situation, however, the suspension period was too long. So, Mikhail Sayno from BrokerCreditService supposes that the placement could have been postponed to the mid of 2010. According to his opinion, by this term, the market will recover fully. Ivan Zavadsky from Kapital Investment Company agrees that it is the reinsurance date. "RZD will have to find another way of receiving money, and probably, it may be one or several private placements", the expert says. The head of InfraNews agency Aleksey Bezborodov adds that, probably, Mr. Yakunin has outlined the new direction of the company’s policy concerning assets sale. "I think that RZD both has suspended the IPOs and will put off other sales of its subsidiaries. It is hard to sell them under the good market situation to say nothing of the current condition", the expert says.