RUSSIA'S MIKHAIL FRIDMAN & ORS buy DEA from GERMANY'S RWE

Germany clears RWE unit sale Posted on » Saturday, August 23, 2014 FRANKFURT: Germany's economy ministry approved the sale of utility RWE's oil and gas unit DEA to a Russian investor, despite tensions between Russia and the West over the Ukraine crisis. The go-ahead announced yesterday removes the biggest hurdle for the 5.1 billion euro ($6.9bn) sale, a major plank in RWE's struggle to reduce a debt burden of more than 30bn euros. As part of the deal, Russian tycoon Mikhail Fridman and his co-investors will get stakes in about 190 oil and gas licences or concessions in Europe, the Middle East and North Africa. Relations between Russia and the West were already deteriorating over Ukraine, when the deal was announced in March. Deputy Economy Minister Stefan Kapferer said the government found that the deal would not endanger Germany's energy supply and the buyer consortium's European Union base had also been a decisive factor. The EU's antitrust watchdog has already given the green light but regulators in a few other countries, which RWE declined to name, have yet to give their approvals. DEA has operations in about a dozen countries, including Britain, Norway, Denmark and Egypt. The German government could theoretically have used a clause in its foreign trade law that allows it to block takeover deals that threaten 'public safety and order', but it would have been an unprecedented move. RWE, Germany's largest power producer, has earlier said it expected the deal to be finalised this year. http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=384437

If Germany's largest power producer is selling off to reduce debt, could it be that things aren't too good in the economy or is this just them overreaching and wanting to scale back risk?

Anyway, some Russian investor has the go ahead to acquire DEA and it looks to be just a bit of red tape holding things up.

Mikhail Fridman is a Russian Ukranian-Jewish businessman - wikipedia here.  Second richest person in Russia.  Among others, founded:

"Genesis Philanthropy Group whose purpose is to develop and enhance Jewish identity among Russian-speaking Jews worldwide." wikipedia

Involved in the luxury house privatisation sale scandal.  Officials:  "were indicted for "appropriation of managed property committed by an organized group on a particularly large scale".  But slap on the wrist response, so state endorsed??

UKRAINE - Selling UAH 2 million bonds

Business Ukraine places UAH2 billion hryvnia-pegged domestic bonds at 19% Journal Staff Report KIEV, Aug. 20 – Ukraine, with the participation of Deutsche Bank at a primary auction on August 15, placed 2.5-year hryvnia-pegged government domestic loan bonds worth over UAH 2 billion among nonresidents, Prime Minister Arseniy Yatseniuk told reporters. "We've placed securities worth $200 million via Deutsche Bank at 19% in hryvnias. This means that they [foreign investors] believe that stability will be seen in Ukraine and there will be no exchange rate fluctuations," the premier said at a meeting with farmers in Cherkasy region on Tuesday. http://www.ukrainianjournal.com/index.php?w=article&id=19026

Not up on this type of info.
Guess this is 2 billion worth of foreign investment that's being sold?
That would then make it a foreign debt - because investors must be paid.

Argentina - what's likely to happen following default

 LAHT Article

"Barings tried for years to reach a settlement on the debt, repeatedly sending representatives to Buenos Aires, but it was not until 1857 – 29 years after the default -- that Barings and bondholders (backed by the threat of some stiff English gunpowder diplomacy) reached a settlement with what was now the Republic of Argentina -- by issuing new bonds, of course.

And with Argentina’s credit now restored with a £1.6 million Barings recapitalization of the arrears, Barings went on to market another £550,000 for Argentina in the first portion of a £2,500,000 33 year Argentina 6% bond maturing in 1899 and even more issuance followed.

By 1890, however, Argentina was on the brink of default again and almost took Barings down with it. With the Bank of England becoming the world’s lender of last resort, it was Baring’s old rival, Rothschild, who would persuade the British government to put together what became a £17 million rescue on the principle that the collapse of Barings would be a “terrific calamity for English commerce all over the world.” [LAHT]

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COMMENT

The world of bonds/debt and investment seems to have:

* a villain (defaulting debtor)
* a victim (investor)
* a rescuer (financial group or even foreign government bank)

What seems to happen is that someone comes along (a group of big investors or a goverment) and offers a bail-out and restructured terms ... and the debt carries over in some shape or other.

If nations that are indebted aren't careful, they stand to lose territory (and maybe even sovereignty), is what I got out of it. 

So that maybe explains why people are prepared to continue to invest in a 'bad' lender.  Countries have value:  resources, territory, strategic location etc.

What's going to happen?  I'm guessing there's going to be a buy-out and restructuring on terms that probably aren't favourable to Argentina? 

But having read about the 65% 'haircut' or whatever it was, it doesn't sound like the terms are all that great for the lenders.  But it depends on how you view profits, I guess.  In other words, how much profit is enough profit?

ARGENTINA - $1 BILLION DEFAULT INSURANCE TRIGGERED ON BONDS

Argentina Default Triggers $1 Billion of Swaps After ISDA Ruling By Abigail Moses Aug 2, 2014 2:04 AM ET Argentina’s failure to pay interest on its bonds is a credit event that will trigger settlement of $1 billion of default insurance, according to the International Swaps and Derivatives Association. ISDA’s determinations committee made the ruling in response to a question posed by Swiss bank UBS AG after the government missed a July 30 payment deadline on $539 million of interest. Argentina is the first nation to trigger default swaps since Greece restructured its debt in 2012. The ruling was seen by traders as complicated because Argentina made the required payment to the trustee for the bond, Bank of New York Mellon Corp. The bank said yesterday that a U.S. judge’s ruling bars it from passing the money to bondholders without a resolution of the nation’s dispute with hedge funds led by Elliott Management Corp., which sued the nation for $1.5 billion. “From the perspective of Argentina, you could argue they provided the payments and the transfer mechanism doesn’t work,” said Jochen Felsenheimer, the Munich-based founder of XAIA Investment GmbH, which manages 2.8 billion euros ($3.76 billion) in credit funds. “From the investor standpoint, you can argue they didn’t get the coupon.” ... Binding Decisions ISDA’s determinations committee was formed in 2009 and makes binding decisions for the market on whether contracts can be triggered. The 15-member group includes representatives from Bank of America Corp., Elliott Management, Morgan Stanley and JPMorgan Chase and Co. There were 2,652 contracts covering $1 billion of Argentina bonds as of July 25, according to the Depository Trust and Clearing Corp. That compares with about $3 billion for Greek bonds when they were triggered in 2012 and $20 billion on Italy’s as of last week. ... EXTRACT ONLY ... FULL @... http://www.bloomberg.com/news/2014-08-01/argentina-default-triggers-1-billion-of-swaps-after-isda-ruling.htmll

Argentina made the payment.

Bank of New York Mellon Corp didn't make the transfer.

Judge's ruling bars the bank.

Perhaps the State should pay the insurance then, because the matter isn't resolved.
One would think there would be avenues of appeal?

ISDA (International Swaps and Derivatives Association) make binding decisions ...but is ISDA impartial?  Is it supposed to be?

Check out the $20 billion bonds associated with Italy!!  That looks an interesting story.

Bloomberg - Anti-Russian Sanctions Overview

Bloomberg Businessweek Article

As Ukraine Heats Up, Exxon to Airbus Eye Growing Risks

By Matthew Campbell July 16, 2014 

As the U.S. and Europe escalate sanctions against Russia over its role in the Ukraine crisis, companies such as Exxon Mobil Corp. (XOM:US), Airbus Group NV (AIR) and Daimler AG (DAI) are facing a threat to their multibillion-dollar businesses in the country. 

“We have enjoyed good relationships with Russian partners,” Airbus Chief Executive Officer Tom Enders said on the sidelines of the Farnborough Air Show near London. “I would only express my hope that these relationships and partnerships will survive the current political tensions.” 

In contrast to sanctions targets Iran and North Korea, Russia’s $2 trillion economy -- about the size of Italy’s -- is closely linked to global business as multinationals have piled into a promising consumer market and resource producer. That highlights the difficulty the U.S. and Europe face in trying to punish Russian President Vladimir Putin. 
 ...
The action blocks the assets of eight state-owned defense firms, including weapons-maker Kalashnikov Concern, which manufactures its namesake assault rifle. The penalties will prohibit any new financing of debt with a maturity of more than 90 days from U.S. sources.

EU Measures

European Union leaders are considering measures that would cut off some public financing of infrastructure projects in the country. Sanctions so far have primarily focused on asset freezes and visa bans for small numbers of political and military figures close to Putin. 

... [CORPORATE INTERESTS ...]

Exxon has bet heavily on its relationship with Rosneft, the state energy producer that’s led by Putin confidant -- and U.S. sanctions target -- Igor Sechin. Next month Exxon expects to begin drilling an Arctic well with Rosneft that will cost as much as $700 million, the most expensive such project ever in Russia. It’s also working on a $300 million shale well project in Siberia.

In a sign of the importance of its Rosneft ties, Exxon CEO Rex Tillerson rebuffed U.S. government appeals to skip an energy forum in Putin’s hometown of St. Petersburg in May, and appeared with Sechin in Moscow last month. An Exxon spokesman said the company’s Russia plans remain unchanged.
Providers of oilfield services have found a juicy potential market in Russia, which needs the latest technology to maintain production from declining Cold War-era fields.

U.S. energy service providers Halliburton Co. ... Schlumberger Ltd. ...and National Oilwell Varco Inc. ... all have significant operations in Russia. 

...Halliburton has worked closely with Gazprom ... Houston-based company, which signed a technology-sharing accord with Gazprom’s oil arm last year, “is certainly trying to make a bigger play” in Russia ...  Halliburton and Varco declined to comment. 

At Canadian airplane manufacturer Bombardier Inc. (BBD/B), “there’s been a little bit more apprehension from our Russian customers to get into big transactions, not just with us,” said Guy Hachey, president of the company’s aerospace business. Along with Airbus, Bombardier has sought to build manufacturing capacity in Russia to meet demand from local airlines.  
...

[Russia's] ... finance ministry predicts economic growth will drop to about 0.5 percent this year ... measures would pile onto existing concerns about corruption, shoddy infrastructure, and stagnant population growth. 

... automaker Daimler AG has backed away from increasing its stake in OAO KamAZ, Russia’s largest producer of heavy trucks. ...

Automakers that are strengthening their ties to Russia ...Renault SA (RNO) and Nissan Motor Co. ... last month completed a 2012 plan to tighten control of OAO AvtoVAZ, Russia’s biggest carmaker. Renault and Nissan, which gained majority control of AvtoVAZ, once described the deal as a critical bridgehead into a key emerging market. Yet when the transaction was sealed June 18, the companies didn’t even put out a press release. Renault and Nissan declined to comment. 

EXTRACTS
FULL ARTICLE - SOURCE - Bloomberg Businessweek - here.
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COMMENT

Obviously a lot of foreign investment in Russia.
Don't know what to make of it other than that.