By John Helmer in Moscow
Sergei Generalov, controlling shareholder and chief executive of Far Eastern Shipping Company (Fesco), has issued an investor presentation on last year’s results without audited financial details. The leak appears to be a repeat of last week’s financial advertorial in London by Russian tanker fleet company, Sovcomflot, except that Fesco denies being responsible for the disclosure.
According to today’s Moscow newspaper report of the Fesco paper, the company managed to cut capital spending in 2009 by $252 million by canceling $152 million of orders for railcars and $100 million for new container vessels. Nine vessels were sold from the fleet for $70 million. Debt was cut during the year from $855 million to $675 million.
The company is reportedly planning to refinance $456 million of these loans, and will issue at least Rb6 billion ($207 million) in three-year unsecured domestic bonds. The paper claims that Generalov is also to sell to a foreign strategic investor treasury shares worth up to $150 million. The negotiations for this deal, according to the paper, are “at a very advanced stage of negotiations”. At Fesco’s current market capitalization of $1.4 billion, such a transaction would represent about 11% of the shareholding. Generalov’s Industrial Investors reportedly owns 56% of Fesco’s stock. Minority stakeholders include the Swedish fund East Capital Russia and the European Bank for Reconstruction and Development (EBRD).
Generalov himself has sued in the UK High Court to defend his business reputation. A statement in open court in July 2007 announced that Generalov, who worked at the Yukos oil company and the associated Menatep Bank belonging to Mikhail Khodorkovsky, “was never associated with any form of corrupt activity during his time at those two companies”. Generalov and his holding, according to the settlement of the court claim, “conduct their business affairs in an honest manner.” In addition, Generalov’s counsel reported that “Industrial Investors is a member of the International Business Leaders Forum in this country [UK], of which the founder and President is Prince Charles.”
Fesco spokesman Stanislav Vartanyan told Fairplay the latest presentation had been publicized without the company’s authorization; he added there were errors in the press report. But Vartanyan refused to say whether Fesco had run a loss or a profit last year. Fesco has not paid dividends since 2002.
The audited financial report for the publicly listed company will not be released until late in May, just ahead of the annual shareholders’ meeting scheduled for June 4. Projections of last year’s Fesco losses by Moscow banking sources have gone from around $70 million, estimated last July, to about $300 million. Falling revenues and earnings, and declining vessel values, have also threatened loan covenant breaches, according to the sources. ING, Citi, Calyon and the EBRD are the main foreign lenders.