VTB Capital 'To Underwrite ALROSA Privatization – Report

Finance and Trade

VTB Capital, a retail branch of Russia’s second largest lender, VTB, plans to take part in the privatization of ALROSA shares as a global bookrunner, the main underwriter, according to a media report from Russia. The bookrunner usually teams up with other investment banks in order to lower its risk. Meanwhile, Interfax reported that Russia's Finance Ministry disagrees with the Economic Development Ministry's proposal to privatize 18.9% of shares in ALROSA and is demanding that only 10.9% of the shares be offered for sale, a source on the government's finance and economics team familiar with a letter Finance Minister Anton Siluanov sent to Economic Development Minister Alexei Ulyukayev told Interfax.

Siluanov believes that the draft presidential decree to reduce the state's stake in ALROSA to 25% plus one share that is being proposed by the Economic Development Ministry cannot be supported. The Finance Ministry is insisting on retaining a fraction over 33% in ALROSA, the source said. Russia, through the Federal Property Agency, owns 43.9% of ALROSA, while Yakutia owns 25% plus one share and is not considering privatizing its stake. Another 8% of shares are held by Yakutia's municipal districts and cannot be sold under the region's laws. The maximum federal stake that could be sold while retaining combined control of ALROSA for Russia and Yakutia is 18.9%. The Finance Ministry is proposing to sell 10.9%, in which case Russia would be left with another 8% above the threshold required for it and Yakutia to retain a controlling interest in Alrosa. But the Economic Development Ministry disagrees. In March, Ulyukayev said he believed it was "quite possible" that the government's stake could be reduced to a blocking interest. If Russia opts to sell 10.9% of shares, the Economic Development Ministry does not rule out another round of privatization to sell the other 8% in 2017-2018, the Interfax report added.