By John Helmer in Moscow
The Far Eastern Shipping Company (Fesco), owned and run by Sergei Generalov, Russia’s largest dry-shipping operator, is to receive a state guarantee for loan repayments of Rb1.5 billion ($52 million), and will apply this to a loan of Rb2.5 billion ($86 million), which is being finalized this month with state bank, VTB.
The decision to award the guarantee was made by a unit of the federal Ministry of Economic Development yesterday, and confirmed by Fesco and Moscow brokers. Separately, Fesco’s railway subsidiary, Transgarant, has received a Rb1.45 billion ($50 million) loan, also from VTB, secured by its railcar fleet. The publicly listed Fesco is the first in Russia’s shipping sector to get a public bailout from the Kremlin.
Moscow bank reports indicate that Fesco’s total debt is $915 million, with $215 million to be repaid by December 31. ING, Raiffeisen, Citi, and Calyon are the main foreign lenders. A $150 million credit from the European Bank for Reconstruction and Development (EBRD), reported by Fesco to be close to finalization several months ago, has yet to come through. If and when it does, ING is reported by other bankers to be ready to roll over, or lend another $50 million. EBRD bought a 3.77% equity stake in Fesco for $120 million last year. This year, EBRD spokesman Richard Wallis has been reluctant to confirm the Fesco loan application, or what has happened since it was lodged. “I am declining to comment on any potential project until it appears as such on the EBRD website, whatever the name of the company,” he said.
Projections of the company’s losses by bankers for this year have gone from around $1 million reported in January, to $39 million in June, and to $72 million estimated in August. Falling revenues and earnings, and declining vessel values, have also threatened loan covenant breaches, according to Moscow bank reports. Company spokesman Stanislav Vartanyan said “the official position of Fesco is that we do not provide numerical forecasts of future results; we rather prefer to report the results achieved.” Since July, he noted, the company has not sold vessels.
Fesco’s share price has dropped 12% over the past month; down 43% over the year. With a current market capitalization of just over $1 billion, the EBRD’s shareholding is now worth $38 million, 68% less than it paid for it in August of 2008.