Stephen Schwarzman, chairman of Blackstone Group LP (BX:US), called on Russia’s government to sell sovereign bonds convertible into shares of state-controlled companies to aid the country’s asset-sale program.
“You could set up government bonds that are convertible into stocks of” the privatized companies so “investors would know they won’t lose money that way,” Schwarzman told a meeting of bankers chaired by President Dmitry Medvedev in Moscow today. “And if, in fact, you have a premium of 20 to 30 percent for the value of the company convertible in a few years as the company grows, that is an interesting way to do privatization.”
Schwarzman, head of the world’s largest private-equity firm, joined JPMorgan Chase & Co.’s Jamie Dimon and Deutsche Bank AG’s Josef Ackermann in Moscow as members of an advisory group consulting the Kremlin on how to turn the Russian capital into a global financial center. Medvedev, who may become prime minister next year, wants to see Moscow competing with London, New York and Hong Kong for capital and financial services. He has also pledged to cut the state role in the economy.
Russia aims to raise more than 1 trillion rubles ($34 billion) from the sale of state assets between 2012 and 2014. The government may cut its stake in OAO Rosneft, which produces almost a quarter of Russian oil, to below 50 percent, and sell its entire holding in the second-largest bank, VTB Group, to get funds for developing industry and infrastructure.
‘Not a Recipe’
Schwarzman said the government’s control over 40 percent of the economy, the highest level among the so-called BRIC countries, is “not a recipe for success.”
Russia should be more transparent about the timing of asset sales and establish clear rules to assuage investors apprehensive of losing money, he said.
“The rule of law here is so important and is perceived as being so lacking that it is discouraging capital from all over the world,” he said. “Because they don’t know if they do the right thing whether they are going to get their money back. If you solve nothing else, you have to solve that problem.”
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