Bank seen owning 38% of Norilsk - Uneximbank forecasted to win official control over its 38% stake in Norilsk Nikel during auction

October 9, 2007 – 4:44 am

Although bidding is open until Aug. 1, the auction of a controlling share of Norilsk Nickel is effectively over, with Russian commercial bank Uneximbank expected to gain official ownership of the 38 percent stake it has controlled since 1995. A letter sent last Friday from Trans-World Group to President Boris Yeltsin, calling for the auction to be canceled, has apparently been ignored. Trans-World, a U.K.-based metals trading company with large investments in the Russian aluminum industry, said that the terms of the auction were unfair and effectively prohibited foreign companies from participating.

So far, no other bidders–Russian or otherwise–have come forward for the Norilsk stake, which includes 51-percent voting rights in the company.

A spokesman for Trans-World told American Metal Market Thursday morning that, despite a July 22 statement from the Russian government that the current auction was open to foreigners, it would not participate due to the reasons cited in the letter to Yeltsin: a lack of time to conduct due diligence on Norilsk and a requirement that a series of deposits be made with Mezhdunarodnaya Finansovaya Kompaniya, a bank which, according to Trans-World, “is not an unbiased party in the matter.”

“In the immediate term, I can’t see any change in the way Norilsk will continue with business,” said Adrian Gardner, a U.K.-based metals analyst with Brook Hunt. “In the medium term, (Norilsk) will have the potential for more immediate access to funds.”

Uneximbank received the Norilsk stake in 1995 as collateral for a $170-million loan to the Russian government in a loans-for-shares program, a deal that several market sources described as “dubious.”

Uneximbank will need to raise significant funds to keep the nickel giant afloat, according to Gardner. “Norilsk needs a lot of money to stay where it is, let alone improve,” he said.

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