Second billionaire forced to sell after margin call
A second east European billionaire businessman has been forced to hand over a large equity holding after being hit with a margin call from an international bank following a collapse in stock market valuations in the region.
Ukrainian billionaire Konstantin Zhevago has been forced to sell a 20.8% stake in his metals and mining group Ferrexpo after JP Morgan, which led the stock market flotation of the company last year, issued him with a margin call.
Like Russia’s richest man Oleg Deripaska, who handed a 20% stake in a Canadian auto parts company to BNP Paribas on Friday, Zhevago had borrowed against his holding in Ferrexpo, but had to sell the stake after a fall in the company’s share price triggered a margin call.
Ferrexpo shares have lost 74% of their value from their high this year and are trading 22% below the IPO price. JP Morgan and Deutsche Bank led Ferrexpo’s London stock market listing last year raising $448m (€326m).
Zhevago, whose wealth is estimate at $3.4bn, according to Forbes, sold the shares to RPG Industries, a holding company which controls London-listed mining company New World Resources, raising $180m to meet the JP Morgan margin call. He retains a 51% stake in the business, though NWR will receive seats on the company’s board.
The situation echoes that of Deripaska who had borrowed $1.2bn to buy the $1.54bn stake in Canadian auto parts company Magna 14 months ago, but was forced to hand it over to BNP Paribas after the collapse in value of the holding, which his holding company Basic Element blamed on the global financial crisis.
Analysts have warned that several other billionaires in Russia and the CIS are at risk from similar calls having borrowed large amounts from international banks using their equity holdings as collateral against the loans.
Marat Gabitov, a Moscow-based analyst at UniCredit, said: “Some of oligarchs really accumulated money, but others increased heavily their investments through high leverage. They thought they could afford the risk as the market was constantly rising and nobody was expecting such a significant crisis.”
-- Write to Harry Wilson at hwilson@efinancialnews.com
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