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COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
COF Presentation CEE London
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COF Presentation CEE London

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  • 1. NewRussiaGrowth
    Private Equity Advisors
    Opportunities for Investments in Russia:
    private equity and mezzanine
    Alexander Abolmasov
    Director
    Email: aabolmasov@nrgc.com
    November2009
  • 2. NRG at a glance
    PrivateEquity
    Credit Opportunity
    Real Estate
    • Established in 2006
    • 3. 20 LPs
    • 4. US$ 177 million
    • 5. Team of 10 professionals
    • 6. 5 portfolio companies
    • 7. Established in 2009
    • 8. Seed capital US$ 30 million
    • 9. Target 1st closing: Q4 2009
    • 10. Team of 5 professionals
    • 11. One deal warehoused
    • 12. Joint Venture established in 2009
    • 13. Target 1st closing: Q4 2009
    • 14. Target size: US$ 300 million
    • 15. Well known team of real estate professionals with proven track record
    2
  • 16. Credit crisis is Russia: 1999 vs 2008.
    • Russia changed dramatically in 9 years
    • 17. GDP 8.5x,
    • 18. CBR reserves 54x
    • 19. Share of Oil&Gas in GDP decreased by 2.1x
    Crisis 2008:
    CBR reserves: $430 bn
    GDP2008: $1,670.3bn
    Oil&Gas: 9% of GDP
    Net private sector capital outflow, $ bn
    Crisis 1998:
    CBR reserves: $8bn
    GDP 1999: $196bn
    Oil&Gas: 18.7% of GDP
    3
    Source: Central Bank of Russia
  • 20. Russian Economy is back on track
    • GDP growth: 2Q09 +0.1%, 2010E +5% .
    • 21. Destocking the major reason for GDP decline (9.1% of the total 10.4%).
    • 22. The CPI is flat since August. YTD inflation is at 8.1%, versus 11.5% a year earlier.
    • 23. RTS increased 2.3x since Feb 2009.
    %
    %
    CBR Reserves
    + 15% (+$58bn to $430bn)
    25% (+$120bn to $600bn)
    -37% (-$224bn to $376bn)
    4
    Source: RTS, CBR, NRG calculations
  • 24. Russian banking system structure
    • State banks share of total corporate loans increased from 49% to 62% since August 2008
    • 25. TOP 20 banks - 77% of corporate loans.
    Loans to corporate sector, $ bn
    62.1%
    100.0%
    75.5%
    23.3%
    10.2%
    10.2%
    5.6%
    4.0%
    4.4%
    4.5%
    5
  • 26. Russian banking system – liquidity problems for next 2-3 years
    • New money is not available from the banks
    • 27. Private banks have problems with capital, because of losses and NPL
    • 28. 6.4% bad debt + 26% “restructured” debt
    • 29. Total banking capital $50bn. Additional capital up to $70bn could be required.
    Sources of credit organisations, $ bn
    6
    Source: Central Bank of Russia
  • 30. Interest rates rise
    Corporate lending rates in Russia
    • The borrowing rate for companies in ruble terms has gone up from 10% to 20-25%
    • 31. The borrowing rate for companies in $ terms has gone up from 8-11% to 16-22%
    • 32. Average interest rate for ruble bonds are 12 - 18% (for the third tier issues – 22% - 28%)
    • 33. Eurobonds rates are 9- 20% in $
    Corporate bonds rates in Russia
    Source: Central Bank of Russia
    Source: cbonds.ru
    7
  • 34. Government support and growth of loans
    • Government aid package in Russia is about 10% of GDP vs. 5% of GDP in US.
    % growth of corporate loans
    % of CBR loans in corporate loan portfolio
    CBR loans
    8
  • 35. Even state banks ask for equity kickers
    Case-study: Roll-over of Sberbankloan to SibirEnergy
    • SibirEnergy sales in 2008 were $3.5bn.The company is listed on the LSE and ranked 56 among the largest companies of Russia;
    • 36. Sberbankextended a 3 year $192m loan to the company with a rate of 16.95%;
    • 37. Equity kicker: 4.03% of shares for $1. The market price of that stake is – $128m plus the additional value of the put option circa$60m;
    • 38. Expected “Sberbank-Сapital” IRR is 39% (subject to price fluctuations), IRR of the put option is 27%;
    • 39. Collateral: personal guarantee from property owners; pledge of 23.3% of shares worth $750m.
    9
  • 40. Short and long-term investment strategy
    2009
    Generate current interest income until repayment
    Provide secured debt to strong borrowers
    Credit Opportunity Fund
    Options and warrants to share upside
    2009 - 2010
    Real Estate Opportunity Fund
    Invest at distressed valuations
    Generate some current rent income
    Refinance as cap rates exceed interest rates. Sell at recovered value
    2010 - 2011
    2009
    Help them grow on the empty field
    Sell at next long-term high market
    Private Equity Fund
    “Bottom fishing”
    Invest in “survivors”
    10
  • 41. What is the Credit Opportunity Fund?
    Target companies:
    • Mid-sized
    • 42. Cash flow positive
    • 43. No distressed borrowers (Debt/EBITDA < 3.5x)
    Investment structure:
    • Senior debt
    • 44. 18-24 month loans in $
    • 45. Collateralized
    • 46. Pledge of target companies’ shares, real estate, liquid assets
    • 47. Personal guarantees of the companies’ owners
    Target returns:
    • 18%+ targeted interest/current return
    • 48. Equity kickers leading to 30%+ targeted gross return
    Governing Law:Deal documents – English Law
    Collateral of assets in Russia – Russian Law
    Monitoring and control:Board participation with veto rights
    Right to appoint a Financial controller
    Regular reports from the company
    Control over use of funds
    Negative controls covenants
    11
  • 49. Begemot – leading toy retail chain.
    Company description
    • Begemotis a leading toy retailer in Russia, second only to Detskiy Mir in terms of revenue from toys.
    • 50. Focus on mid-price and low-price segment with retail prices 40% lower on average than in Detskiy Mir.
    • 51. 50 own and 17 franchisee shops in 66 Russian cities.
    • 52. Key toy supplier for leading retail chains in Russia, such as Magnit, Perekrestok and Sedmoi Continent.
    • 53. In house developed ERP system allows controlling all sales and stocks daily.
    • 54. Average mark up is 96%, private label with mark up of 250% which account for 13% of total sales.
    • 55. EBITDA in 2009 is expected to grow by 37% despite 40% ruble devaluation and resulted slightly reduction of sales in USD.
    • 56. After new debt, the Debt/EBITDA ratio for the company will still be below 2x.
    Key financials
    12
  • 57. Begemot – leading toy retail chain.
    Transaction structure
    • Expected IRR: 42-48%. Floor IRR is 30.5% as secured by put option.
    13
  • 58. Pipeline: Summary
    14
  • 59. 15
    NewRussiaGrowth
    Private Equity Advisors
    Thank you!
    Alexander Abolmasov
    Director
    Email: aabolmasov@nrgc.com
    WWW: www.nrgc.com

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