* IPOs in wings include Metro's Russia unit, Credit Bank of
Moscow, Detsky Mir
* Companies reluctant to go ahead with situation so
* Bankers fear financial 'nuclear option' regarding
By Megan Davies
MOSCOW, March 13 Russian companies looking to
raise money via initial public share offerings are waiting to
see how severely Moscow will be hit by western sanctions for its
incursion into Ukraine, banking and other sources said.
Several IPOs are in the wings including German retailer
Metro's 's Russian wholesale business, children's goods
retailer Detsky Mir, and consumer and corporate credit company
Credit Bank of Moscow.
While companies are not pulling their plans, they are
waiting for the situation to improve, banking sources and
sources familiar with the deals said.
"In capital markets everything is on hold - IPOs etc," said
a senior investment banker at a major Western bank in Moscow,
who added that more scrutiny was also being applied by banks on
any new refinancing deals coming in.
Russia's bloodless seizure of Ukraine's Crimea region has
caused a slide in Russia's stock indices and a weakening of the
rouble. The RTS is down around 10 percent this month while the
rouble, which has been supported by central bank interventions,
is down around two percent against the dollar-euro basket.
Leaders in Washington and Western Europe have signalled they
are prepared to impose asset freezes and other sanctions against
those responsible for violating the sovereignty of Ukraine.
However, some took hope from moves by the West to head off a
pending referendum by Crimea's pro-Russian parliament to give
Russians a greater voice in the disputed region. [ID nL2N0M926O]
"Everyone is waiting for the referendum," said one market
source. "It is wait and see (with respect to IPOs)."
The market source said, however, that deals such as IPOs
could quickly return to normal if tensions ease.
"It's a chess move by the Russian government and people need
to give them credit that they don't want a meltdown and that
cooler heads are there," the person said.
CLOUD OVER DEALS
Russian companies looking to go public have been mainly
consumer-oriented firms, seen as very exposed to a weaker rouble
and slowing economy which hurts people's disposable income.
"All domestic-focused sectors will see dollar earnings fall
in line with the rouble," wrote Sberbank economist Kingsmill
Bond in a research note. "Those areas most exposed to the second
round impacts of a weaker rouble include banks, retailers and
Russian hypermarket chain Lenta went public in
London in late February and its stock market debut was clouded
by political turmoil in Ukraine. The company priced its shares
at the lower end of a range and stock is trading ten percent
below its IPO price of $10 a share. [ID nL6N0LX0U8]
Other deals waiting in the wings include Credit Bank of
Moscow. A source familiar with the deal said the company is
still considering an IPO this year but it would be difficult to
get anything done in the current environment or second quarter.
The bank had been planning a $500 million IPO in the first
half year, a source familiar with the situation previously said,
with Citi, Morgan Stanley and Sberbank
working on the deal. [ID nL6N0JZ2ZN]
Children's retailer Detsky Mir had been aiming to launch its
planned London IPO in mid-March, two banking sources have said.
A source familiar with the deal said on Thursday that the
company still has plans for an IPO and is ready to go ahead but
is waiting for a suitable situation on the markets. No decision
has made to postpone, the source said.
The company aims to raise between $300 million and $400
million, the two banking sources have said. The banks working on
the deal are JPMorgan, Credit Suisse, Citi and
Renaissance Capital. Owner Sistema declined comment.
German retailer Metro's plan for an imminent stock market
listing of a stake in its Russian wholesale business is also
under threat, sources have said.
The company was hoping to raise at least 1 billion euros
($1.4 billion) by selling a quarter of its Russian
cash-and-carry operation in a London IPO scheduled for the
second quarter, organized by Goldman Sachs and Sberbank.
A person with knowledge of the situation previously said
that the IPO's timetable was in danger. Another market source
said this week that if the market situation is the same when
Metro is prepared to launch, it will likely be postponed.
The volume of Russian IPOs so far in 2014 is $952 million -
attributable to Lenta's offering - around double that recorded
the same time last year, according to Thomson Reuters data.
Banks have also shown their nervousness to the Ukraine
crisis by postponing investor forums.
Russia's largest bank Sberbank on Wednesday postponed one of
the country's highest profile investment conferences due to
volatility stemming from the situation in Ukraine. A week ago,
VTB Capital, the investment banking arm of Russia's
second-largest bank VTB, postponed an investment forum
scheduled for April 8 to 9 in New York.
In Moscow, bankers said they hoped that the situation would
not deteriorate so far that the U.S. and Europe would detonate
the 'nuclear option' of freezing dollars held in corresponding
overseas accounts resulting in foreign banks being forced out of
Russia and trade being disrupted.
"It's a gun where one barrel is pointed at the enemy and the
other back at you," said the Moscow-based banking adviser. "If
you pull the trigger you'll shoot yourself in the face as well
as your opponent. It is nuclear, because trade stops in any