KOMMERSANT. The Russian Direct Investment Fund, which was set up at the initiative of Russian President Dmitry Medvedev for joint cash injections with the world’s largest foreign investors into major Russian projects for up to $50 bln (government investments will be up to $10 bln, in the near future RDIF will have around $2 bln of own funds) formed the most of its team in August 2011 and commenced operations. RDIF, which has so far had no office and nobody on payrolls except its CEO Kirill Dmitriev, discussed more than ten potential projects with an aggregate value of up to $6.7 bln in August. Within the next six to nine months some of them could become first deals of RDIF, business daily Kommersant writes.
The core of RDIF’s team will be people who are well known to the investment banking community. Specifically, RDIF has already reached agreement with Tagir Sitdekov, a former A1 Group employee, Troika Dialog senior risk manager Richard Ogdon and Mikhail Irzhevsky from Freshfields will head up RDIF’s legal department. RDIF confirmed in an interview with the newspaper names of all members of the ‘startup’ team, noting it has already been formed by 80%. After October 1, 2011 the fund intends to form a supervisory board and names of potential members are unknown. How much RDIF paid to retain professionals is not disclosed either. As Arthur Shamilov, partner at Top Contact, pointed out, it is likely that apart from salaries and annual bonuses such incentive scheme as carried interest (a share of any profit for a management company and its executives after the exit from a project and payments to investors) will be applied to managers of such high level. “This is a long-term program, usually funds make these payments after the end of operations, i.e. around in five to seven years," he specified.
Since August RDIF has held talks not only with companies eyed as investment targets, but has also discussed projects with potential co-investors. Some projects came to RDIF from Vnesheconombank. Among private investment funds with whom RDIF conducts consultations Kommersant sources name investment group Apax Partners, and also China’s sovereign investment fund China Investment Corporation. RDIF also deals heavily with VTB Bank and there is a strong likelihood that one of the first deals of the state-run investment fund could be transacted on this front. RDIF could provide Oleg Deripaska’s En+ Group with $500 mln on the heels of a similar transaction executed with the state-controlled bank.
The newspaper’s source familiar with the course of the parties’ negotiations states that a minority equity stake is expected to be sold to the fund, as well as to VTB Bank. In July the bank bought 4.5% of En+ shares for the same $500 mln. This block of shares was sold by Oleg Deripaska’s Basic Element, and the money was spent to repay the debt to VTB Bank. However, as far as RDIF is concerned, at issue will probably be additional shares. If the shares are sold based on the holding’s same assessment, VTB Bank’s equity interest will fall to 4.3%, while Oleg Deripaska’s stake will equal 91.4%. RDIF funds are planned to allocate to roll out “Siberian projects of En+ in the mining, metals and energy sectors”. RDIF could get back some funds during an IPO scheduled by En+. However, the stock offering was rolled back several times, and a new timing and parameters have not been determined until now. En+ itself declined to comment.
