Russia's VTB to take control of developer Don Stroy

MOSCOW (Reuters) - VTB (VTBR.MM), Russia's No.2 lender, obtained rights to a controlling stake in developer Don Stroy and will restructure its debts, the bank said on Wednesday.

Russia's heavily indebted construction sector has been badly hit by the global credit crunch and the deep recession of the Russian economy, the first in a decade, and banks are accumulating control of troubled developers' assets.

"VTB and the shareholders of Don Stroy group signed a memorandum of agreement, which provides the bank with the right to acquire 50 percent plus one share of ZAO Don Stroy Invest," the bank said in a statement.

VTB will restructure the debts of Don Stroy to the bank and may also provide additional project financing, the bank said.

VTB would pay the symbolic sum of 500 roubles ($16) for the stake in Don Stroy and will restructure a $500 million loan it provided to the developer, Kommersant business daily reported on Wednesday.

The loan was issued to Don Stroy, which has built some of Moscow's most high-profile luxury housing in recent years, including a tower in the style of Moscow's Stalin-era "wedding cake" buildings.

VTB, which is struggling with losses as rising provisions for bad loans consume its profit and capital, earlier took control of a prestigious residential real estate development near Moscow as repayment for a $2.4 billion loan to businessman Sergei Pugachev [ID:nLR66072]

(Reporting by Dmitry Sergeyev; Editing by David Holmes)

($1=31.55 Rouble)