Tatarstan: A unique republic, A unique investment opportunity
What investors say about investing in Tatarstan
Tatarstan: supporting innovative start-ups
Tatarstan in the capital markets
Tatar banks expand with help of western capital
Taking Tatarstan’s petrochemical resources into the future
Tatarstan’s new Special Economic Zone Alabuga
Tatarstan’s thousands of years of culture
Kazan: home to some of the best sports facilities in Russia
The Republic’s biggest company, Tatneft, already has long experience of international equity markets, having listed on the LSE back in 1996, in one of the first full listings done by a Russian company outside of Russia. Its share price then was $1; it had risen to $420 by 2005. “It’s a unique story in terms of its capitalization growth”, says Tatneft’s general director, Shafagat Takhautdinov.
Other companies from Tatarstan are now preparing to follow Tatneft’s lead into international equity markets. Marc Holtzman, vice-chairman at ABN Amro, says: “There’s at least half a dozen strong candidates for IPOs here.”
And the good news, says Holtzman is that “Tatarstan isn’t just on our radar, but its attracted the attention of a lot of other western investment banks and advisers, looking to help guide Tatarstan companies to the market.”
Some of the earliest companies to market could be Tatarstan’s banks. The Republic has one of the strongest banking sectors in the Russian regions, with banks like Ak Bars Bank, Tatfondbank and Spurt Bank already very experienced at attracting western debt financing. Now, both Ak Bars Bank and Tatfondbank say they are considering raising capital through an IPO.
Ak Bars Bank already managed to attract R11 billion ($400 million) in new equity financing from local investors in 2006, in a private placement deal. Zufar Garaev, first deputy chairman of Ak Bars Bank, says: “The capital injection was absolutely necessary for the continued growth of our bank, particularly to help us open new branches.”
Now the main shareholder in Ak Bars Bank – the Republic of Tatarstan – is in favour of guiding the bank towards an IPO. Prime minister of Tatarstan Rustam Minnikhanov, who is also a member of the board of Ak Bars Bank, says: “An IPO is one way of attracting capital so that we can make Ak Bars Bank stronger, build it up and transform it into a leading national bank with a nationwide network of filial branches.”
The Republic’s second-biggest bank, Tatfondbank, is also considering an IPO, and local analysts say it could be the first of the new spate of IPOs from Tatarstan. Director of strategic development of Tatfondbank Dmitri Nagumanov doesn’t rule it out, but says the bank is first in discussions with the IFC to take it on as an investor, which “would help us attract further resources”.
Another strong candidate for an IPO is Kamaz, which is the biggest truck manufacturer and one of the biggest car manufacturers in Russia. Sergei Kogogin, general director of the company, says: “I’ve proposed to our shareholders, the main one of which is the Republic of Tatarstan, to prepare the company for an IPO in London. It may happen at the end of 2008. The main shareholders are in agreement we can do such an additional share offering, as long as the government has a controlling stake.”
Kogogin says the company is likely to sell a 12% stake, which he hopes will raise around $300 million, to be used for the company’s investment programme. Their consultant for the preparations is the Moscow investment bank Troika Dialog, which also bought a 25% stake in the company last year.
Troika Dialog’s CEO, Ruben Vardanian, was also made a board member of Ak Bars Bank last year, so Troika may be in a good position to be adviser for a future Ak Bars IPO. The brokerage has also been active in organizing seminars and conferences to introduce foreign portfolio investors to the region.
Another very attractive source of IPOs is the holding company TAIF, which owns and manages some of the regional government’s stakes in important companies such as Nizhnekamskneftekhim, Kazanorgsintez, and TAIF-NK.
Vladimir Presnyakov, deputy general director of TAIF and a member of its board, says: “TAIF created a department of specialists who’ve been working for over a year on preparations for IPOs. TAIF could sell shares in one or several of the companies in our portfolio. It will be decided by the end of the year.”
The company’s combined holdings are worth over $5 billion, and Presnyakov thinks that could rise to over $7 billion by the end of 2008, so an IPO of say 20% of the company could raise around $1.5 billion.
Presnyakov says: “We’re already talking to ABN Amro about it, who have given us good advice with Eurobond financing for Kazanorgsintez. An IPO would make our companies more transparent, and would give us access to deep international capital markets.”
Companies from Tatarstan are already established presences on the international debt markets. That includes the city of Kazan, which has issued three rouble-bond issues over the last two years, for a total of around R4.3 billion ($800 million). All the deals were arranged by Rosbank.
Oskar Prokopiev, the deputy mayor in charge of finance, says: “The last deal we did, a three-year bond for R2.3 billion in late 2006, was the most successful, with an interest rate of 8.2%. It was heavily oversubscribed. Investors liked the fact we had a three-year financial plan, and that we were open and investor-orientated.”
The regional government, meanwhile, has some legal restrictions on its foreign borrowing, as do every other regional government. However, the Republic has managed to gain access to the international debt capital markets by the formation, in April 2003, of another holding company, Svyazinvestneftekhim, which holds some of the Republic’s most lucrative stakes, such as a 33% stake in Tatneft, and blocking stakes in Nizhnekamskneftekhim, Kazanorgsintez, Tatenergo and Tattelecom.
Valery Sorokin, the CEO of the holding company, says it serves a dual function: “On the one hand, ministers are administrative rather than commercial figures, so we thought the government could be a more effective shareholder if we concentrated our holdings in one company, along the model of Temasek Holdings of Singapore. And the holding company enabled the Republic to raise debt internationally.”
Svyazinvestneftekhim raised a $250 million 10-year Eurobond in August 2005, which had a 7.7% interest rate. The deal was lead-managed by Dresdner Bank. “It was a very good rate for a debut bond issue”, says Sorokin, “and there’s every possibility we’ll do another deal soon.”
Sorokin also mentions that the company is looking for a strategic investor to help finance development projects in the Republic, and that it is considering finding an investor with experience of the Asian model of fast development, such as Temasek itself.
Both Nizhnekamskneftekhim, Kazanorgsintez and Ak Bars Bank have also successfully secured Eurobond financing over the last two years, while Tatfondbank is preparing a Eurobond issue at the moment, and has already raised a credit-linked note. Nizhnekamskneftekhim and Kazanorgsintez both issued Eurobonds to finance the modernization of their petrochemical factories and to build new factories.
The latest issue was Kazanorgsintez’s $200 million five-year deal, in October 2006, which ABN Amro prepared, which achieved an interest rate of 9.5% and was 1.5 times oversubscribed. Leonid Alekhin, general director of Kazanorgsintez, says: “The Eurobond deal was cheaper than a loan we received from the Russian banks around the same time, and the maturity was longer as well.”
But perhaps the most exciting debt capital market transaction being prepared in Tatarstan is for the $5 billion new petrochemical complex for ZAO NNPZ, 40% of which is owned by Tatneft. BNP Paribas acts as a financial adviser on the deal, which will be one of the biggest project finance deals that will happen in the world in the next 12 months.
