Ripplewood looks to make a killing in IPO of Latvia’s Citadele

By bne IntelliNews October 23, 2015

bne IntelliNews -

Latvia's Citadele banka has set a price range of €1.15-€2.00 per share on its planned IPO, the lender announced on October 23. At the mid-point of the range, the bank – 75% of which was sold by the state to a group of international investors arranged by Ripplewood Advisors for €74mn just six months ago – the bank would achieve a valuation of €362mn.

Citadele plans to list in Riga and London, looking to raise up to €115mn. The GDR's –representing six of the newly issued shares a piece – it says will be priced "at $7.797-$13.56". The final offer price should be announced on November 4. 

Based on Citadele's current 156.5mn outstanding shares, bne IntelliNews calculations suggest a stake of around 27% in the expanded company will be sold. Meanwhile, the EBRD's current 25% stake will drop to around 18%. Ripplewood and the consortium of investors would hold the remaining 55% or so.

Citadele aims to "raise capital to help pursue future growth in Latvia and the other Baltics" with dual listings on November 10, it said in the statement. "The proceeds will [also] be used to repay €34.7mn of the subordinated debt currently held by the Latvian Privatisation Agency."

The offering is only the second IPO of a Latvian company since 2004, when communications technology company SAF Tehnika listed. However, it is hoped Citadele's share offering could help spark a revival.

“Companies have not been keen to offer their shares to the public, since for many of them it is easier to receive financing from the banks,” Janis Springis at Swedbank told bne IntelliNews. “[The] offering is an opportunity for investors who want to gain exposure to the Latvian economy."

Citidele is keen to paint a similar picture. It claims the IPO demonstrates the Baltic economies are finally leaving the global financial crisis behind. “We look forward to reintroducing international investors to the Baltic region, and helping to increase its role in the global capital markets,” Citadele CEO Guntis Belavskis said in a statement.

Who's zoomin' who?

However, critics will suggest the IPO will do even more to boost the fortunes of the private equity owners. The consortium selling the shares is hoping to see the asset gain around five-times the value at which it bought it from the state just six months ago.

Citadele was created in 2010 from the non-toxic assets of Parex banka, which collapsed in 2008 amid huge irregularities, forcing Riga to ask for an international bailout as it seized the lender. The state still holds the bad loans via vehicle Reverta.

Delays on selling Citadele saw it run up against an EU deadline for the state to sell its 75%+1 shareholding in the bank (the EBRD holds the rest). No little controversy followed its eventual acquistion in April by a consortium put together by US private equity company Ripplewood Advisers for just €74mn.

“We were standing with our back against the wall and the investors knew that,” Vladimirs Loginovs, chairman of the Latvian Privatisation Agency, told bne IntelliNews just after the deal went through. The scrutiny locally was "quite staggering”, added Stanislas Lecat, who ran the process for advisor Societe Generale. 

The owners claim Citadele has now been rebuilt as one of the strongest locally-owned players in a Latvian banking sector that has more than its fair share of issues. Unlike most, it has a relatively low exposure to problematic non-resident deposits. It is now the sixth largest bank overall, with €2.33bn of assets, compared with the €4.9bn held by Parex when it collapsed.

“If you put together the direct and indirect impact, the taxpayer can be quite happy,” Belavskis argues.

The IPO, for which Citigroup is the global co-ordinator, will be divided into two tranches, one for institutional investors and the other for retail investors, although the proportions between the tranches have not been made clear yet. Retail investors can sign up for shares from October 23 to November 3, the bank noted in statement. 

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