Budushchee, one of Russia’s largest private pension funds, posted a 9M2017 loss of RUB 2.6bn , driven by the re-valuation of equity stakes it had in FC Otkritie related entities which were worth RUB12bn before Otkritie was nationalized.
Some Moscow based commentators are now suggesting, however, that Budushchee’s involvement in other Otkritie related “financial schemes” could be far larger (with suggestions of RUB 25-40bn). That couldn’t be ruled out, given its equity positions Promsvyazbank and Credit Bank of Moscow – the other two banks of the so called “Moscow circle” – potentially making Budushchee a far more significant factor in a greater “financial scheme” than its 4% equity stake in FC Otkritie had flagged.
Any losses at Budushchee are a major headache for Mints and for the Central Bank of Russia given there are 4.4 mln pensioners with savings in the fund, and how this gets resolved carries a lot of implications. While no one is legally liable for any losses in the funds he helps manage, with a Presidential election in 2018, pensioners looking for scalps will carry significant weight for someone to be held responsible.
Boris Mints on Thursday announced a RUB 1bn equity injection into Budushchee to compensate for some of the losses – a step that we assume is supposed to demonstrate Mints’ goodwill ahead of his negotiations with the CBR (and guaranteeing he will be the first door knocked when they want more). Local commentators are discussing “leaks” suggesting Mints wants a personal meeting with the CBR deputy governor and that Russia’s Interior Ministry is already eyeing the whole affair.
It has been observed that, in the worst case, the only valuable asset in his portfolio is his control over O1 Properties – and that he may be forced to give this up. The most overt implication this has right here and now is that #O1 Properties Eurobonds are likely to stay under pressure in the coming weeks.
On a separate note, Mints’ 78% stake in the Investment Company “Budushchee” (which the Budushchee pension fund is controlled by) is reportedly surety for a RUB18bn loan provided by the Credit Bank of Moscow. As valuations of the pension fund slump, it is likely that Boris Mints may face a margin call from the lender. The whole company (trading on MICEX under FTRE) was still worth RUB 45bn on Friday 10 November 2017 (down from RUB 65bn a month back).