February 7, 2019 / 11:34 AM / 4 months ago

Bankers suggest Russian firms delist as sanctions uncertainty bites

MOSCOW (Reuters) - Uncertainty caused by the expansion of U.S. sanctions on Russia last year has pushed companies’ share prices lower, prompting investment bankers to suggest their clients should delist from local and international exchanges.

FILE PHOTO: Sistema tycoon owner Vladimir Yevtushenkov attends a session of the Eastern Economic Forum in Vladivostok, Russia September 12, 2018. Mikhail Metzel/TASS Host Photo Agency/Pool via REUTERS/File Photo

Once a booming market for equity listings, there were no initial public offerings in Russia last year for the first time in at least a decade.

Share listings allow companies to raise cash for business expansion or other purposes but a fall in their share price can trigger early debt repayments or a need to increase collateral held against loans. Public status also requires a regular disclosure of information, some of which may be sensitive.

Delisting solves these issues.

Russian food retailer Dixy was one of those that decided to delist from the Moscow Exchange last year, while Megafon, Russia’s No.2 phone operator, canceled its London-listed shares and said it would consider doing the same for its Moscow listing.

At the same time, around $4 billion worth of IPOs were delayed in 2018 and while the banking community still expects some of those to eventually come to market, they are suggesting other companies delist.

“Business in Russia is just dying because of the sanctions,” an investment banker from a top-five Russian bank said. “Bankers are actively working on the buyback programs and delistings from international bourses.”

SPECIAL APPROACH

One of the companies approached by bankers last year was Sistema which is listed in Moscow and London, two banking sources and a source close to the company said.

One of the banking sources said that apart from Sistema, another two or three companies were looking at the delisting option.

Sistema, the holding company for a number of assets from agriculture to toys and telecoms, has a market capitalization of $1.46 billion in Moscow, while its MTS unit, Russia’s top mobile phone operator, has a market capitalization of $8 billion.

The banking source said Sistema had decided against delisting its shares due to the high cost of a buyback when its net debt was already 585 billion rubles ($8.85 billion).

A source close to Sistema confirmed that bankers approached the company last year about a delisting, adding that the company was working to reduce its debt.

Sistema, controlled by the Russian businessman Vladimir Yevtushenkov, would have to spend 31 billion rubles to buy the 32.4 percent of its shares which are free floating in order to delist, according to Reuters calculations based on Sistema’s current market capitalization.

Yevtushenkov also confirmed to Reuters that bankers had pitched a delisting to his company but declined to comment further.

A spokesman for Sistema said that the company’s management did not study and are not currently studying a delisting.

“At the same time, Sistema is regularly analyzing the situation on capital markets and looking at the opportunities arising,” the spokesman said.

($1 = 66.0675 rubles)

Additional reporting by Tatiana Voronova, Oksana Kobzeva and Katya Golubkova; Editing by Kirsten Donovan

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