Rustam Tariko “changes standards”?
The banking institution of the “vodka king” found new owners
Russian Standard Bank, owned by the notorious businessman Rustam Tariko, has not yet published official reports on the results of work last year. Nevertheless, it is known that at least twice – in May and October – a credit institution found itself in a multi-billion “minus” and even entered the top 5 most unprofitable Russian banks. Preliminary financial indicators for 2021 also do not inspire optimism: there was a decrease in net profit, net asset value, a decrease in the volume of deposits of individuals, etc. At the same time, the possible loss of control over Russian Standard by Tariko is becoming more and more urgent, associated with the requirements of creditors to repay debts on defaulted bonds of the offshore company Russian Standard Ltd, which are collateralized by 49% of the bank’s shares. After the cancellation of earlier decisions, in the coming year, the businessman is expected to resume litigation with London-based Citibank, acting in the interests of a group of creditors, including the Pala Assets investment fund, owned by the former co-owner of Mechel, Vladimir Yorikh. In addition, last October Tariko’s largest creditor was A1, Mikhail Fridman’s investment division of Alfa Group, which bought back securities from a number of foreign investors. The management of A1 has already stated that in the event of a relevant court decision, they intend to sell 49% of the shares that are the subject of pledge, and the buyers have allegedly already been found. Despite the fact that Russian Standard Ltd regarded this statement as a PR, Tariko was forced to sell one of his most profitable assets – the well-known Polish manufacturer of vodka products to CEDS. Part of the money from the transaction can go to pay off debts on defaulted bonds.
Bank Tariko goes “in the red”
Tired of scandals, Rustam Tariko, the owner of the Russian Standard Bank and the Roust alcohol holding, has lately preferred to keep a low profile and avoid being featured in the media unnecessarily. Too many unpleasant moments he experienced in the past year. However, he has yet to talk about last year’s “successes” in the work of his credit institution.
Recall that, according to official data published in November, according to the results of three quarters of 2021, the profit of Russian Standard under the IFRS amounted to 8.059 billion rubles. It was also reported about the growth of the loan portfolio by 4.6%, the decrease in the share of overdue debts of individuals by 7.3%, etc.
Everything would be fine, but only almost simultaneously it became known that in October, Mr. Tariko’s bank received a loss of 4.5 billion rubles. The institution went into a multibillion-dollar “minus” for the second time in a year: before that, a large-scale loss of 5.4 billion was noted in May, when Russian Standard entered the top 5 most unprofitable Russian banks. Both times the loss was received due to the additional formation of reserves, but if in October it was about the loan portfolio, then in May it was about investments in non-core assets, associates or subsidiaries, including those related to the business of Rustam Tariko himself.
“Such a monthly financial result led to the fact that the accumulated total for January-October, the bank reached a net loss of 2.8 billion rubles,” Kommersant stated in November.
You can get a preliminary idea of the financial performance of Russian Standard at the end of 2021 by reading the data on the Banki.Ru portal. Moreover, these figures do not inspire optimism. Thus, over the year, the net asset value decreased by 22.4 billion rubles, net profit – by 5.7 billion. The volume of deposits of individuals decreased by 11.1 billion, investments in securities – by 3.5 billion rubles. There was also a decrease in the profitability of banking assets and capital.
“Russian Standard”: from rise to fall
After being at the peak of financial recovery in the 2000s, when Russian Standard was considered one of the leading institutions in the retail lending market, the bank has been steadily losing ground. A kind of confirmation of this can serve as an annual Forbes rating of “200 largest private companies in Russia”: if in 2020 Russian Standard ranked 175th in it with a revenue of 57.4 billion rubles, then by the end of 2021 it was already at 191st. ranks 51.3 billion in revenue.
In July 2019, the international rating agency Moody’s, citing some “business reasons” (but not specifying them), withdrew the credit ratings of Rustam Tariko’s bank. In Russian Standard, they said that the decision to terminate the contract with the agency was made back in 2015 in connection with the withdrawal from the debt markets. Since then, Moody’s allegedly rated the bank for free on its own initiative, without receiving specific data and based solely on public information.
The departure of the credit institution from the debt markets was regarded by the publication “Nasha Versiya” as a de facto “refusal to compete with colleagues” and confirmation of the fact that the bank “rolled down”. Already in 2016, the volume of overdue loans to individuals in the banking portfolio amounted to 69.5 billion rubles, that is, about 40%. However, the Russian Standard did not see this as a particular problem:
“All overdue loans are 100% reserved … The bank has the opportunity not to carry out large-scale write-offs and prefers to work independently with clients to restore the quality of problematic categories of loans,” a representative of the institution emphasized in a comment to Vedomosti.
Since then, publications about the impending collapse of the Russian Standard have repeatedly appeared in the press. Allegedly, in order to help the bank, Tariko at one time even put up for sale his 56-meter yacht “Annaeva” (named after the two daughters of a businessman) worth 25 million euros. However, the sale of the yacht is a personal initiative of the banker. Another thing is the verification of transactions of a credit institution by the prosecutor’s office, which was reported by the media in November 2020.
The initiator of the check was State Duma deputy Vera Ganzya: she received an appeal from the owners of defaulted bonds of the offshore company Tariko Russian Standard Ltd, from which it followed that, starting in 2015, about 23 billion rubles could be withdrawn from the bank.
Friedman structure goes on the offensive
The story of the defaulted bonds of Russian Standard Ltd, which turned out to be a pledge of 49% of the shares of Russian Standard Bank, has long been in the focus of journalists’ attention. As is known, among the creditors is the Pala Assets investment fund, owned by the former co-owner of Mechel, Vladimir Yorikh. The management of the fund seeks the collection of shares and their sale at open auctions.
In September 2020, London-based Citibank, which is a trust manager of shares pledged under a bonded debt and acting in the interests of a group of defaulted bondholders, including Pala Assets, filed a claim with the Moscow Arbitration Court for the recovery of collateral. But in January last year, the arbitral tribunal denied this application, effectively supporting the defendant’s position, according to which the pledge agreement contains a defect that prevents Citibank from acting as a creditor, and makes the agreement itself invalid.
However, the point in the matter will not be set soon. Last October, the Moscow District Arbitration Court overturned earlier decisions of the courts of first and appeal instances that had denied Citibank the recovery of a 49% stake in Russian Standard and sent the case back for a new trial. This was preceded by one rather significant event: the largest holder of default Eurobonds (more than 30%) was the company A1, the investment division of Mikhail Fridman’s Alf Group, which bought back securities from a number of foreign investors.
“We confirm that A1 has become the largest creditor. We believe in the investment potential of bonds and believe that control should not belong to a foreign, but to a domestic company, ”A1 told RBC journalists.
The appearance of a new player did not bode well for Tariko. It soon became known that in the event of a relevant court decision, A1, which received the right to claim $ 255 million, intends to sell the entire block of bank shares that has become collateral. Last December, A1 CEO Andrey Elinson told Reuters about two bidding banks for Russian Standard securities that had agreed to take over the management of the asset or buy it out. The names of credit institutions were not specified, but it is known that one of them is a large state-owned bank.
According to Elinson, the company controls a sufficient amount of bonds to act on behalf of the majority of their holders, and the very fact of a deal with foreign investors strengthens A1’s position in court, as it reduces the risk of possible foreign control over the bank. In turn, Russian Standard Ltd preferred to pretend that nothing serious had happened. Elinson’s words were called here “another element of PR, in which A1 seeks to wishful thinking.”
Polish asset “leaves” Tariko
One gets the impression that Tariko refuses to fully realize the full extent of the threat of losing his main brainchild. Or is he seriously convinced that the “people of Friedman”, who were repeatedly accused of raider seizures of the largest Russian enterprises, are engaged in empty self-promotion? No matter how the banker had to regret his former frivolity.
Although it is possible that the calm is feigned. So, last November (that is, almost immediately after the cancellation of court decisions and the activation of A1), the media reported on the sale of Tariko to one of his major assets – the CEDS company, which is a well-known Polish manufacturer of vodka products and the owner of the Żubrówka brand. The buyer was Maspex, the largest holding in Central and Eastern Europe, specializing in the production and supply of canned food. The deal was valued at about $1 billion (PLN 3.89 billion).
According to RBC experts, the banker sold “the most valuable alcohol asset he had.” One of the alleged reasons that prompted him to do this was called “the general situation in Tariko’s business”, and not only related to the alcohol direction. It is not difficult to guess that in this case we are talking about an increasingly complicated situation with the Russian Standard Bank. Indeed, selling a profitable Polish company is far from the same as putting a yacht up for sale, even if it is named after daughters!
At the same time, the authors of the publication in Forbes note that the sale of CEDS helps to reduce the debt burden on Tariko’s alcohol holding Roust Corporation (the “parent” structure of the Polish company), whose debts at the end of 2019 amounted to about 759 million dollars. It is possible that part of the funds received may be used to repay obligations under defaulted Eurobonds. That’s just the big question – will the banker be able to negotiate with the leadership of A1?
“In the 2000s, Rustam Tariko, the creator of one of the most popular Russian Standard vodka brands, elbowed the commodity magnates of the 1990s in the Forbes rating and set the tone for Moscow nightlife. Now a businessman who has dropped out of the list of the richest businessmen in Russia is rarely seen in restaurants and clubs and is increasingly depressed,” Forbes wrote in 2018.
Since then, much has changed and circumstances definitely continue to develop against Rustam Tariko: billions in losses, accusations of withdrawing finances, and finally, a real threat to lose the bank, which he is clearly not going to give up. No matter how the “vodka king” in such situations would have to change the usual “standards” and go “on a bow” to Mikhail Fridman.