Polish distiller left nursing a debt hangover

By bne IntelliNews November 7, 2014

Jan Cienski in Warsaw -

 

Roustam Tariko’s vodka turns out to have a special kick, as the growing hangover of his newly acquired Polish subsidiary attests.

Tariko, a Russian billionaire who owns his country’s largest distiller as well as a leading bank, snapped up Poland’s ailing Central European Distribution Company (CEDC) last year. The Polish distiller, founded by American William Carey, had to be saved after an ill-fated debt-fuelled attempt to become a big player in Russia turned into a disaster that bankrupted the company.

Tariko’s Russian Standard company ended up rescuing CEDC, helping the US-registered company to repay bondholders and exit from bankruptcy proceedings in return for losing independence. Carey and most of the management team were replaced.

But it now looks as though that rescue has still more strings attached, as well as a link to Russia’s growing financial troubles.

CEDC recently bought Roust Trading Ltd, a distribution firm owned by Tariko, for $250m.

Poland’s Puls Biznesu newspaper reports that paying for the distributor is a potential problem for cash-strapped CEDC. Part of the $250m purchase price went to retire Roust's debt, but CEDC also owes its parent $70m in cash for the purchase, of which $9.5m has to be paid by next month. That is a squeeze for a company with only $23m cash on hand.

But Tariko’s companies may need the money.

He is also the owner of Russian Standard Bank, one of Russia’s largest consumer lenders. His bank has been battered by the broader downturn in the Russian economy, with Reuters reporting a 14% drop in loans in the first half of this year, leading to a net loss of RUB4.8bn.

In October Moody’s, the ratings agency, changed Russian Standard Bank's outlook from stable to negative, citing the bank's "deteriorating asset quality against the background of the weak performance in Russia’s consumer lending market".

Bad loans have increased as Russia’s worsening macroeconomic situation puts pressure on households. The news this week of a sharp drop in the value of the rouble will likely strengthen doubts as to the robustness of Russian consumer sentiment.

All that bad news is enough to make one pour a stiff shot of vodka – an action that could help Tariko’s bottom line.

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