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Deripaska Abandons Magna Stake

Back in August, 2007, we were doing quite a lot of blogging about the shareholding arrangement between the large Canadian auto parts manufacturer and Oleg Deripaska’s Russian Machines – a business arrangement which generated a lot of speculation of potential future intervention by the Russian government (Deripaska has gone on record to say that if Putin ever wanted to take over part of his company, there would be no resistance). At the end of this week, however, things weren’t looking so great for the Russian move into Canada – the financial crisis has forced Deripaska to sell off his Magna share in order to pay off the accumulating debt. This one comes from the Financial Times:

Oleg Deripaska became the first Russian oligarch to be publicly hit by the global financial crisis yesterday after he was forced to divest his 20 per cent stake in Magna International, the Canadian car parts maker, to creditors.

Mr Deripaska had faced margin calls on the $1bn loan that helped fund the $1.4bn investment as the value of the stake in Magna he had offered as collateral plummeted, two people familiar with the situation said.On paper, Mr Deripaska is Russia’s richest man with an estimated fortune of $28bn. But concern is growing about the level of indebtedness in his empire which spans aluminium, cars and construction amid the liquidity squeeze and a stock market rout that wiped more than half of the value off Russian stocks since May.Mr Deripaska himself has taken issue with the tag of richest man because it does not take into account the high level of debt in his empire, otherwise known as Basic Element. His UC Rusal aluminium business has said it owes a total $14bn.Rusal is battling to pay off part of a $4.5bn loan it raised to purchase a 25 per cent stake in Norilsk Nickel, the world’s biggest nickel miner, this April which was backed by shares in Norilsk, several people familiar with the situation said.The value of the stake held as collateral has more than halved since the loan agreement was reached. Mr Deripaska has won a preliminary agreement to raise partial refinancing for the loan, three people close to the company said.The news of Mr Deripaska’s forced divestment contributed to another dramatic slide of more than 7 per cent yesterday on the RTS with trading suspended three times to halt a wave of selling. Magna shares lost 4.7 per cent yesterday.