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Comments by Boris Kvasov, Co-Head of Equity Capital Markets at VTB Capital, for GlobalCapital

3 April 2019

Russia momentum continues with LSR block

ECM investors continue to support Russian deals and flooded into a Rub5.8bn ($89m) block in LSR Group, the Russian real estate development company, in what was the latest selldown by one of the country’s oligarchs.

JP Morgan and VTB Capital were the bookrunners on the transaction.

Andrey Molchanov, chair of the board of directors and the largest shareholder in the company, sold 10 million shares at Rub580 a share, an 8.7% discount to the closing price.

Molchanov had only intended to sell 5.7 million shares at launch but because of the strength of investor demand, the deal was almost doubled in size.

“During the transaction investor demand substantially exceeded the share volume offered, which allowed us to approximately double the deal volume,” said Boris Kvasov co-head of equity Capital markets at VTB Capital. “Even with the increased volume, the investor demand still exceeded the offering several times.

“The deal was closed at a discount of 8.7% to the share closing price before the launch of the transaction. This is a very good result, especially taking into account the relatively moderate liquidity of the company's shares.”

Over half of the sold shares went to international investors, including those from the UK, Scandinavia and the USA.

Two Russian IPOs were also launched this week and many onlookers expect the deal flow to continue as Russia’s wealthiest individuals take advantage of a good window to take some cash out.

"We launched at around $50m and grew close to $90m and it is trading really well,” said a banker close to the LSR trade. “There continues to be a lot of demand for Russia we have a few more situations. That is a nice little bonus and we think there will be more to do in Russia over the next few weeks.

"A lot of it is driven by oligarchs or individual shareholders - we saw Rustranscom in the market with its IPO this week and Abramovich has sold down some of his positions."

Shares in LSR were up at Rub617.6 a share early Wednesday afternoon, up 6.5% from the offer price of the block.

Molchanov founded LSR in 1993 and was president of the company until 2007. In 2008 he became a senator, representing the Leningrad Oblast in the Council of Federation of the Federal Assembly of the Russian Federation.

Mochanov was also one of several business leaders included in the US Treasury’s infamous ‘Putin list’ of wealthy Russian oligarchs, published early last year.

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