Unprofitable cement: how Filaret Galchev lost $700 million on LafargeHolcim

The owner of Eurocement Filaret Galchev lost almost $700 million in a month and a half. This happened after the margin-call of the Sberbank loan, where he had encumbred a 6.12% stake in cement producer LafargeHolcim in January.
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Status of the owner "Eurocement Group" Filaret Galchev December decreased by almost 70%, from $ 1 billion to $ 305 million, indicates Bloomberg Billionaires Index. In mid-2014 according to the index of the businessman's assets were estimated at $ 5.6 billion.

In addition to the 100% "Eurocement" Galchev until recently controlled 6.39% of the Swiss company LafargeHolcim, one of the world's leading manufacturers of building materials. However, according to Bloomberg, the businessman had to part with most of the package worth about $ 1.5 billion, after Sberbank announced margin-call loan Swiss Eurocement (also controlled by Galchev).

According to sources, Financial Times, 6,12% LafargeHolcim Galchev collected on loans to Bank of America Merrill Lynch, which is the sum of the publication does not disclose. The company's shares were collateral for these loans. But LafargeHolcim cost is reduced since the summer of 2015 - the last six months it has fallen by more than 40% due to the global decline in demand for building materials. Therefore, the bank demanded to increase security for the loans, according to the FT.

To pay with BofA, Galchev was forced to raise finance in the Savings Bank in the framework ofREPO transaction (with the possibility of redemption) secured 37.2 million shares (6,12%) LafargeHolcim. This was reported on January 21 corporate-sector arm of the Savings Bank. Commenting on the deal, the first deputy chairman of Sberbank Maxim Poletaev stated that "appreciates" the trust between the bank and the company Galchev. The loan amount obtained bail package was not disclosed.

A source familiar with the terms of the deal, said that Sberbank lent Galchev worth about $ 1 billion on the security of shares LafargeHolcim. The market value of 6,12% LafargeHolcim on January 21 was about $ 1.5 billion, as of February 9 -. For about $ 1.2 billion, "This enabled him to pay off the previous lender, the company's shares have moved from BofA to Sberbank," - says the interlocutor of RBC . According to him, Galchev associated with Sberbank long-standing relationship, this is not the first loan granted to it by the State Bank. In particular, the Savings Bank credited the businessman in order that he may make additional provision for loan BofA (amount of security he did not disclose).

"If Galchev initially bought shares under the credit money BofA, he could Stolkutsya with the need to make additional provision in the summer, when the shares LafargeHolcim from July to September fell by more than 30% ", - says a senior portfolio manager GHP Group Fedor Bizikov.

Since the beginning of 2016 shares LafargeHolcim fell another 29%, and the company's capitalization has shrunk by $ 9 billion. This occurred against the background of the strengthening of the Swiss franc. Revenues declined due to slowdown in the economies of Brazil and China, and the weakening of the Russian ruble (the company has assets in Russia), Bloomberg notes. So two weeks later, in early February, one day, Sberbank sold 6.12% stake LafargeHolcim Limited at a discount of 9% (at a price 36.25 Swiss francs per share, while the bought them 41 francs), writes the FT.

Margin-call in the crisis of 2008

Deripaska and Magna

One of the most prominent victims of the 2008 crisis was Oleg Deripaska, then lost 20 per cent stake in Magna of Canada, the world's largest manufacturer of automotive components. A year earlier, BNP Paribas Bank expressed readiness to allocate up to $ 1.22 billion of "Russian Machines", owned by Deripaska to buy shares. As he wrote, "Commercent ", in September 2007, the bank issued a" Russian Machines ", the first tranche of $ 880 million. According to the terms of the loan, Magna shares were pledged in the case of Magna fall of quotations on the New York Stock Exchange, the bank returned the losses from the depreciation of collateral. The Bank also has the right to demand early repayment of the loan in case of depreciation of the shares by more than 30%. According to the publication, then, since the release of the first tranche of the loan, quotes fell by 50.6%, from the purchase of securities of "Russian machines" - by 38.3%.

Deripaska and Hochtief

Following the loss of Magna Deripaska for the same reasons had to give up almost 10% of the shares of the German construction holding company Hochtief. In May 2012, thanks to the loan Commerzbank Oleg Deripaska and his Rasperia Trading bought a 3% stake in Hochtief. According to "Vedomosti", the package price at the time could reach € 160 million. After some time, the company increased its share to 9.9% at the cost of about € 390 million. However, in October 2012 the value of shares fell to € 169, 2 million, resulting in Deripaska has decided to withdraw from the company's share capital. Presumably, Ubaheel businessman could make € 340 million.

Zanadvorov and "The Seventh Continent"

The victim of the crisis in 2008 and became a network of grocery stores "The Seventh Continent". Then its major shareholder Alexander Zanadvorov, according to "Vedomosti", received from Deutsche Bank margin-call loan of $ 560 million, of which provision was 74.81% stake in "The Seventh Continent". But the businessman managed to keep the package - it helped a former business partner Vladimir Gruzdev (through his family foundation).

"Alpha" and "VimpelCom"

The bell margin-call and telecommunication unit "Alfa Group» Altimo holding. In the crisis of 2008, he had to rescue from under the mortgage at Deutsche Bank 44% of the shares "VimpelCom". Then come to the aid of Vnesheconombank "Alpha", who agreed to refinance the loan by $ 2 billion.

"Alpha" and X5

Around the same time, "Alpha" has lost nearly 47.2% of X5 Retail Group. How to write "Vedomosti", the company reached an agreement with a consortium of banks led by Deutsche Bank and BNP Paribas for a loan of up to $ 1 billion, collateralized by shares of retailer. In the spring of 2008 shares GDR X5odesheveli from $ 27.3 to $ 8, so the banks have demanded from "Alpha" to pay the debt or increase security. "Alpha" managed to retain a stake in X5.

Interlocutor RBC familiar with the terms of the deal with Sberbank Galchev, assumes that the entrepreneur is unable to make the necessary collateral on the loan, therefore, due to lower share prices LafargeHolcim bank decided to sell the collateral.

The exchange of such volume of shares not held, confirmed a senior portfolio manager GHP Group Fedor Bizikov. According to him, the day to sell 37.2 million shares on the market is not possible, since the volume of trading is limited to units of millions per day.

Investment bankers familiar with the organizers of the sale LafargeHolcim assets, told RBC that the sale of the company shares at a discount of 9% can be considered successful. "On such an illiquid market to implement a pledge with such a low discount - it is a success", - he said. According to the financier, the deal could be called the market as buyers of the former assets Galchev became more than one investor.

He said that of UBS, an agent for the sale of nchum Lafarge, was able to collect a book of applications from various investors. Buyer package LafargeHolcim, according to the FT, was a group of international investors from the UK, Switzerland, the USA and other countries. A source close to Sberbank, said the sale of shares of the bank was LafargeHolcim business solution that does not negate the further cooperation with Galchev. "We have a fairly large loan portfolio in his company," - he said.

Representatives of "Eurocement", Sberbank and LafargeHolcim declined to comment. Phone Galchev not answered Tuesday.

Among the major shareholders LafargeHolcim, according to the company, Schweizerische Cement-Industrie-Gesellschaft, controlled by Thomas Shmidheyni (controls 11.87%), Desmarais family by Groupe Bruxelles Lambert (9,84%), NNS Jersey Trust (4,97%) Egyptian businessman Nassef Sawiris, Dodge & Cox (3,41% of shares), Harbor Funds (1,86%). Filaret Galchev was the third largest shareholder of the package LafargeHolcim, created by the merger of two leading manufacturers of building materials - Lafarge and Holcim in July 2015, but after the deal with Sberbank had only 0.27% remains.

Negotiations on the merger of the Swiss and French Lafarge Holcim conducted from July of 2013. According to the FT, Galchev in the first stage he did not participate in the negotiations because of the cooling in relations with family Schmidheiny, arising after he tried in 2008 and 2011 to increase the share in the company. However, in May 2014 Galchev approved the merger, to be able to buy the offered for sale as a result of the transaction assets (if it was the second largest shareholder of Holcim with a 10.8% share).

LafargeHolcim is present in 90 countries. The company's headquarters is located in Switzerland, and the trading of the shares is carried out on the stock exchanges in Paris and Zurich.

Last year, Forbes estimated the state Galchev at $ 4.4 billion. In the ranking of Forbes' richest Russian businessmen "in 2015, he held the 23rd place.