Rosneft is losing its appetite

Now the company expects to receive only $10 billion from the IPO

The volume of Rosneft's IPO could be reduced to $10 billion, Peter O'Brien, head of the group of financial advisors to the president of Rosneft (with the rank of vice president), told the British newspapers The Financial Times and The Sunday Times. According to him, continued high oil prices have changed the holding's financing needs compared to the fall, when discussions about placing shares began. “The company is increasing production at an industry-leading pace, generating a significant amount of available funds, and loan rates for us have decreased threefold over the past six to nine months,” Mr. O’Brien noted, with the caveat, however, that IPO parameters will be approved in June by the board of directors of the state-owned company. Indeed, last Friday the state-owned company reported that “the margin on existing loan agreements totaling more than $3 billion was reduced three times from an average of 1.90 to 0.65%.” However, sources in investment funds do not rule out that a possible decrease in IPO volumes will occur not because of the good state of affairs at Rosneft, but because of the reluctance of investors to buy its securities.

Rosneft's $20 billion IPO was expected to be the largest in history. However, recently the company began to carefully note that the main thing for it is to collect $7.6 billion. This is a debt that needs to be repaid by its parent structure, the state-owned company Rosneftegaz, and Rosneft is the guarantor for it. At the same time, Rosneft’s own debt exceeds $10 billion, and previously the company hoped to pay off that too through an IPO.

However, as The Sunday Times notes, the upcoming placement has met resistance from a number of organizations. In particular, one of the largest British investment institutions, F&C Asset Management, refused to participate. The head of the corporate governance and social investment department at F&C, Karina Litvak, said that the IPO raises questions about the legal risks associated with the acquisition of Yuganskneftegaz. Previously, the famous financier George Soros also actually called for a boycott of the IPO for a similar reason.

Although the placement parameters have not been formally approved, sources assure that Rosneft does not intend to bring more than a 30 percent stake to the market. At the same time, 12% of this volume will fall on the share of minority shareholders who will receive securities during consolidation - Rosneft is now exchanging shares of 12 of its main subsidiaries for shares of the parent company. Thus, the market can gain about 18% through an IPO. If we assume that Rosneft intended to raise $20 billion during the IPO, then its managers should value the entire company at almost $100 billion - more than LUKOIL is currently worth. True, a source familiar with the plans of the state holding assures that, according to management estimates, the company is worth $80 billion.

Several investors, in a conversation with Vremya Novostei, unanimously noted that even $10 billion, taking into account the possible risks, will be quite difficult to collect, despite the IPO boom observed on the market. The main intrigue still remains the question of how many shares the company wants to earn $10 billion for.

Denis REBROV