Updated July 7, 2008

   Alisher Usmanov mining and metallurgical holding Metalloinvest JSC has chosen banks-managers of the coming IPO. As it became known, VTB Capital,

VTB Bank subsidiary that has been establ ished three months ago, is listed among them.

Metalloinvest stocks placement becomes the first full IPO held by VTB Investment Bank.

   Top-managers of some banks told that Metalloinvest Holding JSC had chosen managers to place stocks. "Merrill Lynch, Credit Suisse and Deutsche Bank have been chosen as global deal coordinators, and VTB Capital and Renaissance Capital become joint deal book runners (placement managers engaged in bid book maintenance)", says large investment bank top-manager. According to investment department head of another bank, "Alisher Usmanov had meetings with Renaissance Capital chief executive and VTB Bank president, and after these talks a decision to appoint these companies as joint deal book runners had been taken, although their participation was not planned at first". "We consider all options of investments attraction", commented the information about forthcoming IPO in Metalloinvest press-service. In press-services of VTB Capital, Renaissance Capital, Merrill Lynch, Credit Suisse and Deutsche Bank refused to comment.

   As sources say, placement of Metalloinvest securities is planned to Oc

tober-end – early November.

According to head of investment bank, IPO will be held at the Russian stock exchanges, and

at London Stock Exchange as well.

   "No less than 10% from the authorized capital will be offered to investors, and IPO volume can reach $3 billion depending on the company estimation", confirms another investment banker. According to calculations of UBS analytical department head Aleksey Morozov, current Metalloinvest capitalization is $25 billion. "By year-end the company can be estimated at $30 billion taking into account prices for raw materials", adds Bank of Moscow analyst Dmitry Skvortsov. Investment bankers mark that additional issue will not be conducted within placement, and current stockholders will place their interests.

   Metalloinvest Holding JSC comprises Lebedinsky GOK (Mining and Processing Plant), Mikhailovsky GOK, Oskol electrometallurgical plant and Ural Steel.

They produce around 6 million tons of steel and around 40 million tons of iron ore raw materials (40% of the Russian production). Metalloinvest earnings is around $5 billion. Alisher Usmanov owns 50% in the company through Gallagher Holdings Ltd, fund of Andrey Skoch, State Duma deputy, owns 30%, and Vasiliy Anisimov owns 20%.

   "Metalloinvest JSC has to hold IPO to estimate the company business in the run-up to a possible amalgamation deal with Norilsk Nickel JSC", supposes Dmitry Skvortsov. As it has been already reported, Gallagher Holdings Ltd and Interros have agreed on joint mining and metallurgical company establishment on Metalloinvest and Norilsk Nickel basis (around 30% at Interros). Interros has already applied to Federal Antimonopoly Service to purchase 25% plus one stock of Metalloinvest.

Thus, sources close to both businessmen did not eliminate Metalloinvest securities' buy-off by Interros within pre-IPO process.

"Metalloinvest did not make an offer yet concerning pre-IPO", said Interros representative Larisa Zelkova.

   Market participants are not surprised with VTB Investment Bank participation that has been established only three months ago in deal of Metalloinvest placement. "As a rule, the banks that give loans acts then as IPO managers", marks Aleksey Morozov. Alisher Usmanov has been VTB Bank client for long.

In 2005 VTB Bank gave him a $1 billion loan to purchase Mikhailovsky GOK. The businessman paid his loan off in time, and that allowed the bank not only to extend a credit line, but to double its volume. Last year VTB Bank has taken a decision to open RUR 50 billion credit line for seven years term to Gazmetall CJSC, where Alisher Usmanov is the core stockholder.

   Metalloinvest IPO becomes the first full placement with VTB Capital Bank participation. Around two weeks ago VTB Bank president Andrey Kostin declared, "We have already signed two mandates to participate in deals as a book runner, and three mandates to participate as a joint-lead manager". Accord ing to data of sources

in investment banks, within participation as joint-lead manager, VTB Capital Bank experts prepare analytical researches to place stocks of agroindustrial holding Razgulay OJSC and UralChem OJSC.

   Andrey Kostin also marked that VTB Bank was ready to spend $500 million for VTB Investment Bank development. However, according to sources, it has been planned that investment bank reaches its return within second or third year of work, though this can happen even earlier.

"Now heads of many investment banks fear a competition from VTB Capital Bank part, as except for high skilled specialists and extensive corporate clients' base, VTB has large opportunities of lending", sums up investment department head of one large bank.