From creditors to shareholders

Development Bank may enter Sukhoi capital

Vnesheconombank announced yesterday its intention to acquire at least 10% of the shares of Sukhoi Civil Aircraft (SCAC), which is designing the Sukhoi Superjet 100 regional aircraft. However, VEB is ready to carry out this transaction only after it itself has been transformed into a Development Bank. The Russian government introduced a bill on the Development Bank to the State Duma in January.

Yesterday, Vnesheconombank entered into an agreement with the London branch of Deutsche Bank to provide a loan to finance the Sukhoi Superjet 100 program. According to this agreement, the British bank will loan VEB 16.9 million pounds sterling ($33.2 million) for a period of 13 years. VEB, in turn, will lend this money to GSS for the purchase of equipment from the French company Thales, which is involved in the creation of the Superjet 100 aircraft. The loan is notable for the fact that the guarantor of VEB’s obligations under it is the British government agency ECGD (Export Credits Guarantee Department). As Sergei Lykov, Deputy Chairman of Vnesheconombank, said at the agreement signing ceremony, this is the first time since 1998 that ECGD is involved in a transaction in Russia. Established in 1919, ECGD insures export credits of British banks. It curtailed its activities in Russia after the default in August 1998. Mr. Lykov emphasized that he views ECGD’s participation in the project, as well as the long loan term, as a sign of high confidence of European banks and export insurance agencies in VEB.

Mr. Lykov also said that Vnesheconombank may become not only a lender, but also a co-owner of the project to create a new generation Russian regional aircraft. According to him, the bank is analyzing the feasibility of acquiring a stake in GSS. “Now we are talking about 10% of the shares,” said the deputy chairman of VEB. “In the future, everything will depend on the status of the project.” The first Superjet 100 was delivered for static (ground) testing last month. The first flight of this aircraft is expected in the fall of 2007. Its serial production according to GSS plans should begin in 2008.

The timing of the acquisition of shares, according to Mr. Lykov, will depend on how quickly the Development Bank is created. The bill prepared by the government provides that the Development Bank will be created by merging the Russian Development Bank and Rosekimbank with VEB. The new structure will have the status of a state corporation and will combine the functions of an export insurance agency and an export-import bank.

CJSC GSS was created in 2000 as a 100 percent subsidiary of the Sukhoi aviation holding company and still has no other shareholders. A preliminary agreement on the sale of a 25% stake plus one share of GSS was reached with the Italian concern Finmeccanica. In June 2006, when this document was signed in the Kremlin, Russian President Vladimir Putin and Chairman of the Council of Ministers of Italy Romano Prodi were present. However, the deal is not yet closed. Maxim Grishanin, Vice-President for Economics and Finance of the SSS, promised yesterday that it would be completed this year.

Mr. Grishanin estimated the value of a 10 percent stake in GSS at “tens of millions of dollars.” He also said that the company plans to increase its authorized capital, and did not rule out that as a result of this operation it will have new shareholders.

Mikhail KUKUSHKIN