* IPOs in wings include Metro’s Russia unit, Credit Bank of Moscow, Detsky Mir
* Companies reluctant to go ahead with situation so uncertain-sources
* Bankers fear financial ‘nuclear option’ regarding sanctions
By Megan Davies
MOSCOW, March 13 (Reuters) - 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.
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 transport companies.”
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. [ID nL6N0LN0NC]
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. [ID nL6N0M01C0]
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 direction.”