Liquidity crunch catches up with Russian tycoons

The Financial Times ^ | 9.11.08 | Catherine Belton and Charles Clover

[BurbankKarl]

The falling price of oil and increased political risk following the conflict in Georgia played a prominent role in driving Russia's stock market to new lows yesterday.

But bankers and traders said that the underlying reason for the selling was a liquidity crunch of the kind that affected western markets a year ago but has only recently appeared in Russia - a serious cash shortage that is forcing banks and funds to sell otherwise attractive assets.

Analysts said the market was being forced down as leading Russian businessmen and funds had to liquidate positions due to margin calls as they were unable to raise cash elsewhere.

Traders and bankers would not disclose the names of Russians facing margin calls. But a handful of the country's richest tycoons have made fortunes borrowing money from Russian banks to buy shares, pledging some of the shares back as collateral. Many have also pledged shares to raise funds for expansion.

Suleiman Kerimov, one of Russia's richest men, gathered a windfall spending billions of dollars in loans in 2004 and 2005 from Sberbank, the state-controlled savings bank, to amass a 6 per cent stake in the institution and 5.5 per cent in Gazprom, the energy major, pledging some of the shares back as collateral.

[unspun]

"liquidity crunch"

tee - hee - hee