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. Last Updated: 07/27/2016

VEB Gets $500M for Property Project

ReutersDeputy Prime Minister Igor Sechin, Zhukov and Putin talking on Tuesday as Chinese Premier Wen Jiabao looks on.

Vneshekonombank received a five-year, $500 million loan from the state-controlled Chinese Development Bank for the construction of a shopping and office complex on Leningradsky Prospekt, VEB announced Tuesday.

The planned 480,000-square-meter complex will be built on the site of Clock-Making Factory No. 2, located near Belorussky Station.  

Russian lenders, especially state-owned banks like VEB, have been trying to develop the real estate they acquired from companies that have fallen victim to the crisis. The site, once owned by Globex Bank, came into VEB’s possession after the state development bank acquired Globex, which had acute liquidity problems, in October 2008 for a symbolic 5,000 rubles ($170).

VEB said in June that it would merge Globex and Svyaz Bank — which together cost the state some $5 billion to bail out — and sell the new company to a strategic investor.

Before the crisis hit, Globex planned to develop the territory into a 26-floor, 220,000-square-meter business and shopping center, Vedomosti reported.

VEB declined to elaborate on the terms of the loan.

Analysts, however, said it would likely be just above the London interbank offered rate.

“Assuming that the pricing is market based, it could be 1.5 to 2 percentage points above LIBOR, as the credit default swap on the Russian market is 179 basis points right now,” said Mikhail Galkin, an analyst at VTB Capital.

The Chinese Development Bank probably would not be looking for a large rate, said Stanislav Bozhenko, an analyst at UralSib.

“This is part of the broader partnership between Russia and China,” he said. “In addition, there is a load of cheap money on the market again as LIBOR is close to its historical minimum, and China Development Bank chose this option given VEB’s credit quality.”

VEB would not say who would act as the project’s developer.

Globex received a green light for the complex’s construction in early 2008, a VEB spokeswoman said. The complex could also include at least one hotel, she said.

VEB also received a separate, $500 million loan from the Export-Import Bank of China, Deputy Prime Minister Alexander Zhukov said from China on Tuesday.

Zhukov, who was accompanying Prime Minister Vladimir Putin and other top officials to Beijing, also said the countries were discussing ways to settle trade using the ruble and yuan, rather than the euro and dollar, Bloomberg reported. They also discussed increased cooperation in combating smuggling, Zhukov said, Interfax reported.

It would be a long time, however, before the currencies would replace the dollar as the preferred means of settling trades, he said.

In other lending deals, VTB Group, Russia’s second-largest lender, said it received a $500 million loan from the Agricultural Bank of China.