EBRD loses $100mn as it exits Russia's TransContainer

EBRD loses $100mn as it exits Russia's TransContainer
EBRD takes $100mn hit in sale of stake in Russia's TransContainer.
By Jason Corcoran in Moscow April 15, 2016

The European Bank for Reconstruction and Development (EBRD) has completely exited Russia's TransContainer, marking the end of a troubled investment in which it has lost more than $100mn. 

Kommersant daily reported that EBRD sold its 9.245% stake to NPF Welfare pension fund for RUB2.75bn ($40mn), citing an unidentified source close to the pension fund group. The price for its stake would represent a significant loss for the EBRD, which bought it in 2008 for 132mn. This makes a loss of $105mn at current exchange rates.

The deal closed on April 6, according to an April 15 statement on the London Stock Exchange website. 

"We have sold our shares in TransContainer but we are still managing a portfolio worth 6bn plus and are not planning any early exits," an EBRD spokesman told bne IntelliNews.

The EBRD has exited a number of assets in Russia over the past year after freezing new investments and loans in the wake of sanctions incurred by the Kremlin for its actions in  Ukraine.

Prior to the sale of the EBRD's 9.2% stake in TransContainer, state-controlled Russian Railways held at least 50% in the company, the Far Eastern Shipping Company (Fesco) had a 24.1% stake and NPF 10.29%.

EBRD bought its stake in TransContainer as a pre-privatisation punt and under its long-term commitment to Russian railway reform. TransContainer was spun off as an independent entity in 2006 as part of a structural reform aimed at developing a competitive market to replace the monopoly Russian Railways had previously held over all rail infrastructure and operations. 

TransContainer held an initial public offering in Moscow and London at $8 share in November 2010, raising about $400mn with Russian Railways selling a 35% stake.

The other foreign investors Moore Capital and GLG wisely sold out after the IPO but EBRD held on to its stake. TransContainer's global depositary receipts (GDRs) currently trade in London at $4.99, well below their IPO levels.

The company, which controls 47% of Russia's rail container transportation, in April recorded a 22.6% y/y decline in net profit to RUB2.8bn ($60mn), even as revenue increased 16.2% to RUB42.5bn.

TransContainer owns and operates more than 64,000 large-tonnage containers, 24,500 flatcars and a 46-station network of cargo terminals in Russia and Slovakia. The company also has a 50% stake in Kedentransservice, Kazakhstan's leading operator of logistics terminals, which manages 19 rail terminals in the Central Asian state.

EBRD, set up in 1991 to help countries in the former Soviet Union become market economies, is scaling back its portfolio in Russia. The bank last year sold its stake in utility Enel Russia and cut its holding in hypermarket chain Lenta. Its Russian portfolio shrank to 6.3bn by June last year from 6.8bn at the start of the year, according to the EBRD's own data.