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Prokhorov’s Renaissance Leads Goldman-Backed TCS

Billionaire Mikhail Prokhorov
Russian billionaire Mikhail Prokhorov. Photographer: Simon Dawson/Bloomberg

Billionaire Mikhail Prokhorov’s acquisition of Renaissance Credit is extending the retail lender’s borrowing advantage over Goldman Sachs Group Inc.- backed Tinkoff Credit Systems as yields tumble to records before a possible bond sale.

Prokhorov’s Onexim Group, which purchased almost 50 percent of Renaissance Capital for $500 million four years ago, acquired the remainder of the investment bank on Nov. 15 and boosted its stake in Renaissance Credit to 89 percent. The yield on Renaissance Credit’s dollar debt due in April 2013 sank 448 basis points this week to 4.15 percent, the lowest since being sold in March 2010. That widened their discount to Tinkoff’s 2014 dollar debt to 498 basis points, the most on record.

“Renaissance Credit is growing fast and needs funds so it would be timely to sell bonds,” Roman Luchkovsky, an analyst at VTB Capital, said by phone Nov. 15. “The fourth quarter is usually strong for consumer lenders ahead of the New Year holidays when people buy presents and go traveling so they will want to get funding.”

While Prokhorov has said politics is more important to him than business, his takeover of the bank is helping lower borrowing costs as Renaissance Credit seeks funds to finance double-digit growth. The bank is weighing its first Eurobond in two years in the first quarter next year, according to a person familiar with the matter who declined to be identified because the plans aren’t public.

Debt Sales

Elena Leshchinskaya, a spokeswoman for RenCredit, didn’t answer calls after business hours. Andrey Belyak, a spokesman for Prokhorov’s Onexim Group, declined to comment. Oleg Anisimov, a Tinkoff spokesman based in Moscow, didn’t answer calls to his office.

Specialist consumer lenders Renaissance Credit, Home Credit & Finance and Tinkoff had loan growth of 50 to 100 percent in 2011, and are enjoying a similar pace of expansion this year, according to a RenCap report. Tinkoff, part-owned by Goldman Sachs, said in September that it plans 14 billion rubles of domestic debt, while Home Credit & Finance sold Eurobonds this quarter along with billionaire Roustam Tariko’s ZAO Russian Standard Bank.

Loan Growth

Renaissance Credit’s loan portfolio grew by 45 percent this year and the lender will probably boost earnings to $110 million from $80 million in 2011, Alexei Levchenko, chief executive officer of Renaissance Credit, said on Nov. 19.

Prokhorov’s Onexim is likely to try to sell bonds on behalf of both Renaissance Capital and Credit the company may need to prove itself to investors, according Dmitry Poliakov, a senior analyst at Sberbank Investment Research, who cited a restructuring at RBC when Prokhorov acquired the media company in 2009.

“Onexim has been unpredictable,” Poliakov said by phone on Nov. 19. “I don’t think investors can rely just on the whims of one particular individual.”

Onexim’s 50 percent ownership “did not have any impact on operations or credit quality,” at Renaissance for three years, according to Maxim Tishin, who helps manage $1 billion of assets at UFG Asset Management in Moscow.

“I would like them to come forward and explain what their plan is now that they have control,” Tishin said in e-mailed comments. “If they need liquidity, Onexim can provide bridge loan. It will be cheaper for them if Onexim comes up with a credible strategy first, and then go to market.”

Ruble Gains

The ruble rose 0.4 percent to 31.1920 per dollar by 6:35 p.m. in Moscow. Non-deliverable forwards, which provide a guide to expectations of currency movements, showed the ruble at 31.6621 per dollar in three months.

A gain in Russia’s dollar bonds due in April 2020 cut the yield three basis points, or 0.03 percentage point, to 2.583 percent, the third day of declines. The yield on the government’s domestic ruble bonds due in June 2017 dropped 12 basis points to a record 6.84 percent. The yield on Russia’s international ruble bond due in March 2018 slid three basis points today to 6.20 percent.

Russia is rated BBB by Fitch, the second-lowest investment-grade ranking. The extra yield investors demand to hold Russian government dollar bonds rather than U.S. Treasuries fell two basis points to 193, according to JPMorgan Chase & Co. indexes. The difference compares with 168 basis points for debt of similarly rated Mexico and 150 basis points for Brazil.

Cost Protection

The cost of protecting Russian debt against non-payment for five years using credit-default swaps fell one basis point to 148, according to data compiled by Bloomberg. The default swaps cost four basis points more than Turkey, which is rated one level lower at BBB- by Fitch. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

Renaissance will now be more part of “the system,” reducing risk and increasing revenue opportunities, former Chief Executive Officer Stephen Jennings said in an e-mail to staff on the day Prokhorov’s takeover was announced. Onexim is “dedicated” to developing RenCap, it said in a statement on its website.

The ownership change is “moderately positive” because it reduces risks resulting from the broader Renaissance Group’s investments and leverage, James Watson, a managing director at Fitch Ratings, said by phone Nov. 19.

It provides the “two entities with a single and relatively strong controlling shareholder,” he said.

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