Russia's Galchev No Longer a Billionaire After Margin Call

  • Sberbank sold 6.12% of LafargeHolcim, owned by Eurocement
  • Eurocement owner Galchev's wealth declines to $155 million

Russian tycoon Filaret Galchev, the owner of Eurocement Holding AG, has found out how easy it is to lose a billion-dollar fortune in less then two months.

The businessman’s wealth has dropped to about $155 million, down from $1 billion at the end of December and $5.6 billion in the middle of 2014, according to the Bloomberg Billionaires Index. His fortune dwindled as the global economic slowdown hurt demand for construction materials. Then this month Sberbank PJSC made a margin call on a loan to Eurocement, secured with a 6.12 percent stake in LafargeHolcim Ltd. that was valued at $1.5 billion, according to three people who asked not to be identified because the information isn’t public.

Galchev, 52, is the first Russian billionaire tracked by Bloomberg to lose a large international asset after borrowing on margin since the 2008 financial  crunch. 

LafargeHolcim, created last year in the $35 billion merger of Holcim Ltd. and Lafarge SA, has tumbled as the Swiss franc strengthened and the ruble plunged, which put pressure on its Russian assets, while economic growth slowed in Brazil and China, hurting earnings. So far this year, the stock has fallen 29 percent, erasing $9 billion in market value. Galchev spent $2.3 billion acquiring 10 percent of Holcim starting in 2008.

On Monday, LafargeHolcim shares dropped 8 percent to their lowest since 2009 after Chairman Wolfgang Reitzle said he planned to step down amid the continuing integration of the Swiss and French companies into the world’s biggest cement maker.

Trust Level

The fate of Galchev’s stake was sealed quickly. On Jan. 21, Sberbank’s corporate and investment banking unit organized financing for Eurocement under a repurchase agreement with 37.2 million shares of LafargeHolcim. Sberbank First Deputy Chairman Maxim Poletaev said at the time that the lender “highly values” the level of trust it shares with Eurocement. Two weeks later the bank asked UBS Group AG to sell the stake to a group of international investors, a deal that was carried out overnight at a 9 percent discount.

Eurocement’s and Sberbank’s press services declined to comment on the repo deal or the stake sale. LafargeHolcim also decline to comment.

Galchev’s case is a reminder of the lesson to Russia’s rich learned in the 2008 financial crisis. That’s when billionaire Oleg Deripaska’s holding company gave up its stake in Magna International Inc. after loans used to pay for the $1.54 billion purchase were called in as the Canadian auto-parts maker’s shares lost half their value. A week later Deripaska also ceded 10 percent of Germany’s biggest builder, Hochtief AG.

‘More Conservative’

More margin calls involving large assets are unlikely although some smaller players may run into problems over distressed debt, Egor Fedorov, an analyst at ING Bank Eurasia AO, said by phone. 

While other Russian billionaires have pledged shares as collateral for bank loans -- such as Dmitry Mazepin’s stake in Uralkali PJSC and Alisher Usmanov and his partners’ stake in MegaFon PJSC, they’ve avoided strict margin requirements and are less likely to lose the assets.

“The oligarchs’ strategy has changed a lot in recent years,” said Denis Zabolotnev, chief of equity trading at BCS Financial Group. “If earlier they were focused on the aggressive growth through leverage, now they are more conservative.”

The top 18 Russian billionaires on the list of the world’s 400 richest people have lost $11.8 billion this year, according to the Bloomberg Billionaires Index.

(Earlier version of the story was corrected to fix spelling of LafargeHolcim.)

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