Citigroup Fail To Raise Finance For Russian Deal

by Stewart Douglas

Story link: Citigroup Fail To Raise Finance For Russian Deal

Investment bank Citigroup has today announced it has failed to raise funds for billionaire businessman Vladimir Potanin in his bid to buy a quarter equity stake in Russian metals company Norilsk Nickel, as a result of lasting problems from the credit crunch and the fallout from the US sub-prime mortgage sector.

The move has been seen as a disappointment, with the expert equity house failing to raise the required capital for Mr Potanin’s attempted transaction, falling short of the $10 billion needed for funding the operation.  The inability of Potanin and Citigroup to raise the funds will almost certainly spell the end of his bid to secure the $16 billion purchase.

Inevitably, the failure will pave the way for aluminium giant Rusal, which is waiting in the wings to takeover the equity stake should Potanin, who has exercisable rights over the stake prior to any other potential bidders.  The move, should it fail as expected, will be seen as a landmark failure for both parties to the bid, and will do under fire Citigroup’s reputation no favours.

Potanin drafted in the help of Citigroup to raise the capital from Western markets, particularly London, following the initial raising of $10 billion from two separate Russian banks.  It is thought that the next port of call will be the Asian markets or the Middle East in order to secure the last minute funding required.

The stake in Norilsk, the world’s largest mineral miner, is to be sold by Mr Prokhorov, former major shareholder who has since had a disagreement with the Russian authorities and opted to sell his stake. 

Neither Potanin nor Citigroup were available for comment on the matter, and it remains to be seen whether Citigroup’s growing problems will continue to prove to be a stumbling block for the firm.