July 2005
Monthly News Report
Submitted by Roman Vvedensky, BISNIS
representative in Nizhny Novgorod, Russia
The report summarizes commercial, political and
business development news in the Nizhny Novgorod region, Republic of Tatarstan
and Chuvash Republic for July 2005. The information is received from the
Russian news agencies (INTERFAX, NTA), TATAR-INFORM.RU, INTERTAT.RU, REGNUM.RU,
REGIONS.RU, regional periodicals, PR departments, and web-cites of the regional
governments and local companies.
The report highlights:
Nizhny Novgorod Region:
·
ZMZ motor-maker
invests US$ 5 million to update its foundry
·
Lukoil-NORSI
announces US$500 million investment for the next four years
·
Nizhny Novgorod
government forecast US$280 million investment in new malls in 2006
Republic of Tatarstan:
·
ICL KME CS
awarded with Silver Partner status of American Power Conversion
·
Svyazinvestneftekhim
holds road-show for $250 million issue
·
Fitch rates Edel
Capital S.A.'s $250 million loan participation notes 'BB'
·
KAMAZ sells truck
assembly license to Iranian firm
Chuvash
Republic
·
Japan's Mazak to
supply equipment to Promtractor for 2 Million Euros
·
Promtractor group
plans to place 60 million Euros in Eurobonds in 2007
ZMZ motor-maker invests US$ 5 million to update
its foundry
The motor-making company ZMZ, Nizhny Novgorod region, announced US$5
million investment in its subsidiary foundry company Rosalit.
The company launched 3 automated plants on a basis of pressure die
casting machines, produced by IDRA, Italy. Each new plant enables to cast and
dress 60 moldings per hour, compared to 20 moldings per hour with previous
equipment. The new machinery also ensures higher quality of production of 3-8
kg aluminum moldings, which now meet the requirements of the highest – fifth –
class of accuracy.
Lukoil-NORSI announces US$500
million investment for the next four years
Lukoil has announced a launch of US$500 million investment program to
modernize production facilities of its subsidiary Lukoil-NORSI, located next to
Nizhny Novgorod.
The investment program provides for construction of catalytic cracking,
alkylation and viscosity breaking facilities and refined oils shipment terminal
for the next four years.
Nizhny Novgorod government
forecast US$280 million investment in new malls in 2006
According to the statement of the Nizhny Novgorod government, it
forecast US$280 million investment in mew malls construction in the city in
2006.
The new malls and shopping centers will be built by Moscow-based
companies Mosmart and Russkaya Troika, and Nizhny Novgorod based companies
Elektronika and Stolitsa Nizhny.
ICL KME CS awarded with Silver
Partner status of American Power Conversion
APC (American Power
Conversion) corporation awarded ICL
KME CS, the largest IT company of Tatarstan, with Silver Partner status within
the certification program for partner companies in InfraStruXure™ system.
The Silver Partner status acknowledges
experience and competence of ICL KME CS in construction of on-demand
architecture for network-critical physical infrastructure (NCPI). NCPI is the
foundation upon which all highly available networks depend. It consists of UPS
Power Distribution Racks, Cooling, Cooling Distribution, Cabling, Cable
Distribution, Integrated Services, and Management Tools.
APC announced US$408
million sales for January-March 2005. 50% of its sales are reported with
Northern and Latin Americas, and 25% of sales – with EMEA (Europe, Middle East
and Africa).
Svyazinvestneftekhim holds
road-show for $250 million issue
Svyazinvestneftekhim of Kazan is holding a road-show for a $250 million
Euronote issue. The road-show, which began in the first decade of July, is
being held in Europe and Asia, Elvira Saifullina, an assistant to the
Svyazneftekhim general director, told Interfax. She did not say when the notes
would be placed.
Moody's assigned a "(P)Ba1 rating to the upcoming issue with a
stable outlook. Edel Capital S.A. will place the notes. Fitch assigned a BB
rating to the issue.
The money raised will be used to finance Svyazinvestneftekhim
subsidiary: SINEK Capital S.A. and the parent company itself. Svyazinvestneftekhim
will allocate the money in loans to portfolio companies for investment projects
in Tatarstan and to the state mortgage agency to develop the mortgage market.
Fitch rates Edel Capital S.A.'s
$250 million loan participation notes 'BB'
Fitch Ratings assigned Edel Capital S.A.'s ("Edel") upcoming
issue of USD250 million loan participation notes due 2015 an expected rating of
'BB', the agency said in a press release.
The agency has not, however, assigned ratings to the issuer itself or to
any affiliated entities. The notes are to be guaranteed both by OJSC
Svyazinvestneftekhim ("SINEK") and the Republic of Tatarstan
('BB'/Stable/'B'), and while two third-party legal opinions have been provided,
Fitch has not sought to judge the enforceability of the guarantees. Instead,
Fitch has drawn comfort from the Tatarstan government's decision on 18 June
2005 to amend the Republic's budget so as to include the obligations under the
guarantees.
The assignment of the final rating is contingent upon receipt of final
documents conforming to information already received.
The proceeds of these notes will be lent to SINEK Capital S.A. and
on-lent to SINEK, which is a holding company wholly-owned by the Republic of
Tatarstan. Once the issue proceeds are received, SINEK intends to lend them to
certain portfolio companies to fund investment projects in the Republic and to
the national mortgage agency to facilitate the development of the home mortgage
market.
The Republic of Tatarstan has issued a guarantee to the amount of RUB13
billion (equivalent to approximately USD 453 million) to support the issue. In
order to minimise foreign currency exposure, the issue is materially
over-collateralised 1.81x (at current exchange rates) by the guarantee. In case
of significant depreciation of the RUB, leading to an overcollateralisation of
less than 1.1x, the issuer will repay parts of the issue so as to restore the
1.1x overcollateralisation. Under the terms of the guarantee, in the event of a
default by Edel, the Republic will be obliged to pay the rouble-denominated
amount of interest and principal that Edel has failed to pay, subject to the
budget restraint. Due to this legally binding and unconditional guarantee,
Fitch has assigned a rating to the upcoming issue equal to that of the
Republic. Fitch notes, therefore, that any changes in the Republic's rating
would affect the rating of Edel's loan participation notes.
Additional credit comfort is obtained from the covenants in the bond
issue. Most significant is the put option event, which allows bondholders to
redeem the issue should SINEK's shareholding and voting rights of OAO Tatneft
and OAO Nizhnekamskneftekhim - two of its key investments - fall below 25%.
This adds significant bondholder protection because if SINEK reduces its stake
in these two major companies to below a blocking minority stake, the
bondholders will have the option to be repaid in full from the sale proceeds.
Additionally, any portfolio disposals SINEK may wish to make will be subject to
a cash flow-to-interest coverage test. This will ensure that SINEK does not
dispose of key investments that currently pay dividends unless other cash flow
streams come on line in the future.
At present, SINEK is primarily reliant on the dividends from its
portfolio companies to make payments with respect to its obligations. SINEK's
main source of cash flow is dividends received from its four key investments
(OAO Tatneft ('B'/Stable/'B'), OAO Nizhnekamskneftekhim, OAO Kazanorgsintez and
OAO Tattelecom) in its portfolio of 19 companies, which represent 97% of its
2004 declared dividends and 77% of the portfolio valuation. In particular, the
company depends heavily on the financial performance of Tatneft, Russia's sixth
largest oil exploration and production company, which makes up approximately
75% of the dividends that SINEK receives. In future, however, SINEK will also
have the interest income from the loans it intends to make to the national
mortgage agency and to other companies to support its dividend flow, which will
be used to service the issue obligation.
SINEK was founded and incorporated in April 2003 as an open joint stock
company, with the Ministry of Land and Property Relations acting as the sole
shareholder of the company on behalf of the Republic of Tatarstan. SINEK was
established to support investments in the Republic's economy and, in accordance
with its charter, is authorised to provide a range of management, marketing and
other related services to a number of the Republic's strategic companies
through a unified holding company structure. Upon the formation of SINEK, the
Republic transferred its shareholdings in 19 companies, ranging from financial
services and telecommunications to oil and gas and energy and petrochemical
among others, into the company's investment portfolio.
KAMAZ sells truck assembly
license to Iranian firm
KAMAZ, producer of heavy trucks, concluded a license agreement with
Rakhsh Khodro Diesel Company, Iran, to assemble KAMAZ diesel trucks there.
The Iranian company plans to start production at the site next to the
city of Tebriz early next year. It plans to assemble 1,500 trucks with vehicle
sets, shipped by KAMAZ, during the first year of operation, and, then, to
increase the production capacity of the plant to 5,000 trucks per year.
CHUVASH REPUBLIC
Japan's Mazak to supply equipment to
Promtractor for 2 Million Euros
Promtractor, in Cheboksary, and Japan's Yamazaki Mazak Trading
Corporation (Mazak), have made a contract to supply equipment worth 2 million
euros, Promtractor's press service said.
Promtractor will receive three multitask processing centers for the
mechanical work of base members, tuning operations and laser work, the release
says. The subsequent purchases of such equipment will set up several
high-production technological complexes, the release says.
Promtractor group plans to place
60 million Euros in Eurobonds in 2007
The Promtractor Group is planning to place Eurobonds in 2007, Semyon
Mlodik, general director of Promtractor Plant, told the press at the
presentation of a first series Promtractor-Finance bond loan.
In answer to an Interfax question on the possible size of the loan,
Mlodik said that it will be more than 60 million Euros. He also said that
Promtractor Group is planning to issue second series ruble-denominated bonds in
2006. The volume of the possible placement will be determined after
Promtractor-Finance places the first series of bonds, Mlodik said.