RenCap Starts Latin America Debt Trading in Diversification Push

  • Bank completed first equity transaction in Egypt in May
  • Opens office in Cape Town and arranged investor visits to Iran

Renaissance Capital, a Russian investment bank owned by billionaire Mikhail Prokhorov, has started trading Latin American debt as it pushes into new regions and dilutes reliance on a slowing home market.

RenCap, as the Moscow-based bank is known, hired Phillip Kim for its New York office in May to manage trading in Argentina, Brazil and Venezuela debt, Anthony Simone, the firm’s acting chief executive officer, said. The move follows a new office opening in Cape Town, a debut equity transaction in Egypt and exploratory visits to Iran with investors.

“It was really important for us to be known not just as a Russian investment bank, not because of sanctions and geopolitics, but because of what our investors want from us, which is a diversification,” Simone, who took over as chief of RenCap from Igor Vayn in May, said in an interview at the bank’s investment conference in Moscow. “When we talk to our clients, LatAm is a huge part of what they do. It was an easy add-on for us."

While investment-banking fees in Russia have slumped to a 16-year low, reeling from oil prices trading close to half their 2014 levels as well as U.S. and European sanctions, investors are placing bigger bets on on an economic rebound in Latin America. New governments in Argentina and Brazil have sought to mend relations with international investors and their bonds and currencies have surged.

Brazilian local-currency sovereign debt has outpaced all emerging markets in dollar terms this year with a 43 percent return, and the Argentine peso has risen 5 percent against the dollar since March. Venezuela, also suffering from weak energy markets, is "highly unlikely" to have enough hard currency to fully meet debt payments this year, though it may avoid default, Moody’s Investors Service said in a report.

Elsewhere, RenCap organized the sale of a stake in Credit Agricole Egypt in May, its first such transaction in the country. It has also arranged investor trips to Iran and its analysts are now covering the country’s economy, though the bank has no plans to establish a local office, Simone said.

“From a client perspective, it’s still very early days,” Simone said about Iran. He also said the company doesn’t plan any other new offices for now, having set up an operation in Cape Town, South Africa in December.

In Russia, a planned sale of shares in sanctioned state lender VTB Group, which RenCap is managing, will not happen until the end of 2016 or "more likely" next year, Simone said.

“It’ll be difficult to sell, particularly taking into account the sanctions, oil prices and general economic environment,” Simone said. “But it’s important for us to have an active role in Russia."

Simone also said there is no deadline for the appointment of a permanent replacement of Vayn, who stepped down last month, and the bank doesn’t want to "rush into it."

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