VTB Bank decided to get rid of the PIK company
The tandem of a major banker and developer has broken up. VTB Bank got rid of its stake in PIK Group. The details of the deal are still unknown, and this makes us assume the worst: otherwise bankers are simply in a hurry to get rid of assets that are about to become toxic.
In the transaction for the sale of 12.36% of the shares of PIK Group there are complete unknowns. It is not clear why the bank decided to exit the construction business right now, the amount of the transaction was not announced, and finally, the name of the new owner (owners?) of the sold package was not even named. VTB representatives got away with only a terse comment, saying, “the investment itself is assessed as successful for the group’s business.”
Close cooperation between VTB and PIK began back in 2017. It was with the help of VTB that the owner of the developer, Sergei Gordeev, bought shares in the company from his business partners – Alexander Mamut and Mikail Shishkhanov. At the same time, VTB itself became a co-owner of PIK, increasing its share in the company to 23% in 2019. It was later reduced to the current package of 12.36%.
It is noteworthy that in the summer of 2018, the rules of the game in the construction market radically changed: developers can now carry out construction using funds from equity holders only with the help of project financing. In other words, since 2018, the real estate market has actually begun to merge developers with bankers. Against this background, VTB’s entry into the PIK group looked more than logical.
That is why the departure of bankers now looks quite remarkable. Firstly, the sale of shares took place exactly after the end of the moratorium on non-disclosure of full financial results. PIK, let us remind you, unlike other major market players, took full advantage of this indulgence, so the financial results of the developer’s work for 2022 remained a mystery, shrouded in darkness. No one knows how PIK is doing this year either. If we assume for a moment that everything is not very good with PIK’s finances, then VTB sold the shares at the right time. In 2017, bankers purchased the developer’s securities for 380 rubles, and sold them for 815. At the time of the sale, the capitalization of PIK Group on the Moscow Exchange was 545.5 billion rubles, so if the package was sold at the market price, the bank could earn 67.3 billion for it rubles Not bad, considering that all last year there were rumors in the media about the possible bankruptcy of the developer.
And I must say, these rumors had their basis. Thus, “Our Version” examined in detail the problems with the company’s debt load. At the end of 2021, the amount of credit debt of PJSC PIK SZ amounted to 447.29 billion rubles, and the amount of project financing – 336.44 billion. Also, information about mass layoffs in the developer’s architectural bureau, PIK-Project, was heatedly discussed on social networks. Although the parent company subsequently issued a refutation, they only stated that “the figures are greatly exaggerated.”
However, if we assume that VTB knows something and decided to escape from the sinking ship ahead of time, this may mean that the Russian real estate market is on the verge of a hitherto unprecedented crisis. Let us recall that the result of the 2014 crisis was, for example, the bankruptcy of one of the largest companies at that time, SU-155. The developer was supposed to complete the construction of apartments for 20 thousand shareholders in 130 objects in 14 regions of the country. For this, a total of about 57 billion rubles had to be allocated, which was received by the Russian Capital state bank, which was later sanitized and turned into DOM.RF.
With PIK the situation may turn out to be much more dramatic. The company is currently building about 5.1 million square meters of housing in 15 regions of our country. At the same time, the company’s percentage of sales of finished housing, according to DOM.RF, is 50%. On average, in an overstocked market (the overstocking of which they prefer not to notice) this is one of the highest percentages of sales. However, given that in order to implement new projects, developers need old projects to be sold, this figure no longer looks so rosy.
So it turns out: sales are slow, the debt burden is growing, the bank is losing capital, and millions of unfinished square meters are dragging the company even further to the bottom. Prices per square meter continue to rise, but the entire real estate market has been firmly on the hook of preferential mortgages for several years now. It’s only a matter of time before this bubble bursts.
PIK, let us remind you, is included in the list of systemically important enterprises. This means that we can assume that funds will be sought from the budget for his possible rescue.
It is possible that VTB simply decided to declare in advance that it does not intend to act as a rescuer. Moreover, recently the bankers have already acquired a new problematic asset: in early August, the United Shipbuilding Corporation (USC) was transferred to the trust management of VTB, and the bank was tasked with taking care of its financial recovery. It is interesting to note that Rosatom had already refused such a dubious gift. What if VTB simply had no time for PIK and was secretly allowed to simply dump it? As usual, together with shareholders.