The government decided to transfer USC to VTB’s trust management for five years
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The government has decided to transfer the United Shipbuilding Corporation (USC), which is responsible for the construction of almost all warships and most of the civil ships in the Russian Federation, to VTB for five years. According to Kommersant, the decision was caused by the disruption of the USC recovery program, launched in 2020. Initially, the Ministry of Industry and Trade offered to transfer USC to Rosatom, but the state corporation refused. Now VTB will solve the financial problems of USC, for which it will be necessary to attract extra-budgetary funding, the volume of which has yet to be estimated.
The shares of Russia’s largest shipbuilder – USC (100% state-owned) – will be transferred to the trust management of VTB, Vladimir Putin said on August 10 at a meeting with the head of the bank Andrei Kostin. According to him, there are issues that require special attention, including those related to “calculations, financial recovery of the company.”
The head of the Ministry of Industry and Trade, Denis Manturov, specified that USC shares would be transferred for five years to attract extrabudgetary funding. Sources of Kommersant claim that the reason was the failure of the USC financial recovery program. According to them, initially the Ministry of Industry and Trade offered to transfer the OSK to Rosatom, but the latter refused. In January 2023, the head of USC Alexei Rakhmanov announced that he would transfer 51% of the shares of Baltzavod to Rosatom, since the state corporation is the anchor customer of Baltzavod. However, the decision was never made. Rosatom does not comment on the transition of USC under the control of VTB.
USC unites more than 50 design bureaus, shipbuilding, ship repair and machine-building plants, research centers and enterprises in 15 regions of the Russian Federation. USC’s revenue for 2022, according to the company, amounted to 350 billion rubles.
In 2020, the government approved a program for the financial recovery of USCs, which included preferential restructuring of part of the debts and additional capitalization from the budget (see “Kommersant” dated May 15, 2020). Probably, the program did not yield significant results: in 2022, the Ministry of Industry and Trade and the Ministry of Finance conducted an audit of USC’s accumulated debt on civil projects in order to then launch financial recovery.
In July 2023, Denis Manturov in an interview “Interfax” said that the Ministry of Industry and Trade has already developed a draft of financial support measures for USC, which includes additional capitalization and repayment of “problem debts”. The Ministry of Industry and Trade explained to Kommersant that it was calculated until 2027, and additional capitalization is needed to “complete the construction of unprofitable orders and restructure debt to banks.”
In the near future, VTB specialists will analyze the management structure and conduct financial analysis, in connection with which the further fate of the head of USC Alexei Rakhmanov is in question, Kommersant sources say.
However, rumors about the possible departure of Mr. Rakhmanov from USC have been actively circulating in the industry in recent years, but in the end they were not confirmed. Mr. Rakhmanov was unavailable for comment. VTB Kommersant did not specify who would oversee the USC project within the bank.
Andrey Kostin, at a meeting with the president, called the proposal to transfer USC to VTB “unexpected”, but admitted that he “knows the organization well.” He repeatedly criticized the work of the USC and in a published in RBC An April 11 column expressed doubt that the state-owned corporation would be able to “promptly and effectively deal with” the need to “build hundreds of new oil tankers, gas carriers, offshore vessels, container ships, and other specialized civilian vessels.” He also told Reuters that shipbuilding is one of those industries “that are simply created in order to be privatized, transferred to some other companies.”
Andrey Kostin, head of VTB, about shipbuilding, June 9:
“There are industries that, in my opinion, are simply created today in order to be privatized. But such monopoly monsters – they are meaningless.
The Ministry of Industry and Trade explained to Kommersant that VTB does not become the sole executive body of USC, but exercises the powers of the owner on issues, the list of which is currently being worked out. USC reported that trust management of shares does not change the form of ownership and obligations under existing contracts, including the execution of state defense orders and the construction of civil projects. VTB also stated that “corporate changes should in no way affect the corporation’s obligations to customers, cooperation, and employees.”
Chief of non-core assets
Kommersant’s interlocutors do not undertake to estimate the amount of money needed for the “recovery” of the USC: the modernization of shipyards can cost tens of billions of rubles, and the construction of new ones can cost hundreds. Most of Kommersant’s interlocutors believe that it would be logical to separate civilian assets from the structure of the corporation for possible further privatization. However, the new owners will face the issue of loading the shipyards.
VTB (the second largest bank in the country, RUB 26.7 trillion) has extensive experience in transactions with non-core assets. In particular, the bank has a total of several hundred billion rubles of long-term investments, Dmitry Pyanov, deputy chairman of the board of VTB, disclosed in April 2023, specifying that it is not planned to increase them. This includes grain assets, real estate assets, etc. More often, companies were on the bank’s balance sheet, in contrast to the case with USCs.
At the same time, as Kommersant’s interlocutors note, VTB will receive the right of first choice in financing USC projects, the ability to control financial flows, check the economic feasibility of projects, etc. But new restrictions may arise, in particular, on financing, since USC will be considered a related company.
At the same time, a positive impact on capital is also possible: VTB has one of the lowest capital adequacy ratios among the largest banks, at the beginning of July the standard (N1.0) was 9.4%.
Kommersant’s interlocutors note that this transaction may affect capital through income from trust management (that is, through profit). However, the scale of this effect is not clear.
According to Portnews’ Nadezhda Malysheva, in the medium term, VTB is likely to have its own view on the sale of certain civilian assets, such as Baltzavod. In addition, the entry of VTB will affect the alignment of forces in the leasing of ships, where there are now two major players: Mashpromleasing (part of USC) and the industry leader STLC (a structure of the Ministry of Transport). “Now this market will obviously be under the control of VTB Leasing, which can significantly weaken STLC’s position in this segment,” she believes. At the end of 2022, VTB Leasing ranked fourth in the industry in terms of new business (RUB 174.246 billion).
USC, despite criticism, gave results, Ms. Malysheva believes: since the establishment of the corporation, its enterprises have built and repaired a total of more than 320 ships and vessels, of which more than 205 are civilian ships. Moreover, two-thirds were manufactured after 2014, when the introduction of Western sanctions against the Russian Federation began. USC, as a monopoly, has always been criticized for high prices, but the corporation rightly complained in response to the need for large serial orders. “It should be noted that in 2022–2023, after the introduction of tough sanctions, USC took over the revision and redesign of ship projects using foreign components, including private ones,” says Ms. Malysheva.
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