Deripaska Gives Up Magna Stake

In the latest signal that no one is immune from the current financial crisis, billionaire Oleg Deripaska has handed over one of his biggest overseas investments -- a one-fifth stake in Canadian auto parts maker Magna, worth $912 million -- to creditors.

Deripaska, ranked Russia's richest person by Forbes magazine, ceded his 20 million shares in Magna to an unidentified bank that financed the original deal, Magna said in a statement Friday.

In May 2007, Deripaska agreed to pay more than $1.5 billion for the Magna stake, held through his Russian Machines auto subsidiary. Since then, shares in Magna have tanked, losing nearly half their value.

Reports at the time said French bank BNP Paribas was helping finance the deal.

"Russian Machines has made a decision to terminate their participation as a shareholder in Magna International due to the current global financial crisis," Basic Element said in a statement posted on its web site Friday.

"Cooperation of Russian Machines with Magna in development of auto components business in Russia and other projects will continue as planned," the statement said.

Analysts said the news was further proof that, after a year of lavish spending, Deripaska could be forced to sell off some of his major assets.

"Deripaska is facing very big liquidity problems," an investment banker who covers the industry said on condition of anonymity, citing the sensitivity of the situation.

"He has been on a big buying spree ... and it seems like a lot of it was done through loans, and now with the current problems he is having trouble refinancing it," the banker said.

Over the past 18 months, Deripaska's acquisitions have included a 30 percent stake in Austrian construction giant Strabag and United Company RusAl's taking a 25 percent stake in Norilsk Nickel -- one of the biggest deals in the country's corporate history.

RusAl, in which Deripaska is the majority shareholder, took a $4.5 billion loan in March from a consortium of international banks to finance the purchase of the Norilsk stake. Norilsk's share price has since fallen dramatically.

Basic Element spokesman Sergei Rybak dismissed suggestions that Deripaska's firm was facing liquidity problems as "fundamentally" incorrect.

"We have the necessary liquidity," Rybak said. "The firm's debt burden is bearable."

Rybak refused to discuss the specifics of the decision to hand over the stake in Magna, saying only that "like any major company [Basic Element] is working to optimize our credit portfolio."

A spokeswoman for BNP Paribas in Moscow refused to confirm that the bank was involved but said it might issue a statement in the next few days.

The events surrounding Magna come amid a series of media reports that Deripaska could be facing liquidity issues.

On Wednesday, Vedomosti reported that Soyuz Bank, owned by Deripaska, was looking to boost liquidity by offloading around $800 million of loans.

On Friday, production was halted for the rest of the month at Deripaska's pulp plant near Lake Baikal, Interfax reported, citing the leader of the plant's labor union.

The halt was because of "temporary difficulties" connected to the payment of products due for export, Interfax reported.

Basic Element CEO Gulzhan Moldazhanova confirmed Sunday that the holding as a whole was not seeing any problems with liquidity. But she said Basic Element had stopped hiring staff because it saw "no bottom" to the credit market turmoil.

"Our country's economy and the global economy will go through a slowdown,'' she told reporters, Bloomberg reported. "Our hiring was tied to expansion'' and the start of new projects.

When the Magna deal was signed it was heralded as a major step toward increasing foreign involvement and expertise in the Russian auto industry and giving the Canadian firm greater access to the booming regional market.

Magna on Friday praised its partnership with Deripaska and promised that it was not withdrawing from the Russian market.

"Our strategic alliance with Russian Machines has assisted us in accelerating our growth on the Russian market," Magna co-chief executive Siegfried Wolf said in a statement.

"We believe that the Russian market still holds significant opportunity for us and intend to continue to pursue joint opportunities," Wolf said.