Disadvantageous cement: as Filaret Galchev lost $700 million on LafargeHolcim

The condition of the owner “EUROCEMENT group” of Filaret Galchev from December declined by almost 70%, from $1 billion to $305 million, according to a Bloomberg Billionaires index. In mid-2014, according to the index, the assets of the businessman was estimated at $5.6 billion

In addition to 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 cost about $1.5 billion, after Sberbank announced a margin call on the loan Swiss Eurocement (also controlled by Galchev).

According to sources of the Financial Times, 6,12% LafargeHolcim Galchev collected on loans Bank of America Merrill Lynch, the publication does not disclose. The company’s shares were the collateral for these loans. But the cost of LafargeHolcim decreases with the summer of 2015 — over the last six months it fell by more than 40 percent due to global decline in demand for building materials. Therefore, the Bank was required to increase collateral for loans, the FT reports.

To pay off BofA, Galchev was forced to raise funding from Sberbank under a REPO transaction (with an option to repurchase) is secured to 37.2 million shares (6,12%) LafargeHolcim. About it on January 21 announced the corporate and investment banking unit of Sberbank. Commenting on the deal, the first Deputy Chairman of Sberbank Maxim Poletayev said that “appreciates” the trust between the Bank and the company Galchev. The amount of credit received under the guarantee of the package are not disclosed.

A source familiar with the deal said that the Bank has credited Galchev worth about $1 billion secured by shares of LafargeHolcim. The market value of 6,12% of LafargeHolcim on 21 January was approximately $1.5 billion, on 9 February for about $1.2 billion. “It allowed him to pay off the previous lender, the company’s shares have moved from BofA to Sberbank,” — says the interlocutor. According to him, Galchev associated with Sberbank long-standing relationship, this is not the first loan, granted by the state Bank. In particular, Sberbank financed a businessman so that he could make additional collateral for the loan BofA (the amount of security he did not disclose).

“If Galchev originally bought the shares under the BofA credit money, he could be faced with the need to Deposit additional collateral in the summer, when the shares LafargeHolcim from July to September fell by more than 30%,” says senior portfolio Manager GHP Group Fedor Bizikov.

From the beginning of 2016 LafargeHolcim shares fell by another 29%, and company capitalisation has decreased by $9 billion This happened against the strengthening Swiss franc. The company’s revenues declined due to slowing economies in Brazil and China and the weakening of the Russian ruble (the company has assets in Russia), says Bloomberg. So two weeks later — in early February — a savings Bank in one day sold 6,12% of LafargeHolcim Limited shares at a discount of 9% (36,25 Swiss franc apiece, while acquired their 41 Frank), writes the FT.

The interlocutor familiar with the terms of the transaction with Sberbank Galchev, assumes that the entrepreneur was unable to make the necessary additional collateral for the loan, so the decline in value of the shares LafargeHolcim, the Bank decided to sell the collateral.

On the exchange of such volume of shares was not passed, confirmed a senior portfolio Manager GHP Group Fedor Bizikov. According to him, the day to sell 37.2 million shares on the market is impossible, so the volume of exchange trading is limited to the units of millions per day.

The investment banker familiar with the organizers of the sale assets LafargeHolcim, said that the sale of shares of the company at a discount of 9% can be considered successful. “On such an illiquid market to sell the collateral, with such a low discount is a success,” he said. According to the financier, the transaction can be called a market, because buyers of the former assets of Galchev was not one investor.

He said that UBS, acting as agent for the sale of a package of Lafarge, managed to assemble a book of bids from various investors. The buyer in LafargeHolcim, according to the FT, has become a group of international investors from UK, Switzerland, USA and other countries. A source close to Sberbank said that the LafargeHolcim sale of shares was a business decision of the Bank, which does not prevent further cooperation with Galchev. “We have a fairly large loan portfolio on his company,” he said.

Representatives of EUROCEMENT, Sberbank and LafargeHolcim declined to comment. Phone Galchev Tuesday did not answer.

Among the major shareholders LafargeHolcim, according to the company, Schweizerische Cement-Industrie-Gesellschaft, under the control of Thomas Schmidheiny (controls 11,87%), the desmarais family, through Groupe Bruxelles Lambert (9,84%), NNS Jersey Trust (4,97%) Egyptian businessman Nassef Sawiris, Dodge & Cox (3,41% of the shares), Harbor Funds (1,86%). Filaret Galchev was the third largest shareholder of the package LafargeHolcim, created with the merger of two leading manufacturers of building materials — Lafarge and Holcim in July 2015, but after the deal with Sberbank, he was only 0,27%.

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

LafargeHolcim-present in 90 countries. The headquarters of company is located in Switzerland and trading of shares on the stock exchanges in Paris and Zurich.

Last year Forbes estimated his fortune at Galchev $4.4 billion In the Forbes “Richest businessmen of Russia” in 2015 he took 23rd place.