raising capital in difficult market conditions

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Raising capital in difficult market conditions

Deutsche Bank presentation at Belarus Finance and Investment ForumMinsk, 22 October 2008

Elena YassikSenior Associate, Equity Capital Markets, Central and Eastern Europe

GARRELA

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Deutsche Bank’s global footprint in 75 countries

Equity underwriting

Equity trading dominance

Distribution footprint

Debt Capital Markets

M&A Advisory

Depository services

Local presence in the CIS


Deutsche Bank – Leading equity franchise in the CIS (2007 – 2008YTD)

1 Deutsche Bank 6,298.4 13.9

2 Credit Suisse 5,354.7 11.8

3 Renaissance Capital 4,975.9 11.0

4 JP Morgan 4,778.7 10.6

5 Morgan Stanley 4,517.2 10.0

6 Citigroup 4,091.2 9.0

7 Goldman Sachs 2,597.9 5.7

8 Troika Dialog 1,950.1 4.3

9 ABN AMRO Rothschild 1,391.4 3.1

10 Credit Suisse 1,072.7 2.4

Bookrunner US$ (bn) Market share (%)


Deutsche Bank – track record in the CIS

US$449m

Initial Public Offering

Sole Global Coordinator and Joint BookrunnerApril 2008

US$€487m

Follow-on Offering

Joint Global Coordinator and Joint BookrunnerApril 2008

€253m


Sole Global Coordinator andJoint BookrunnerNovember 2007

US$1.9bn


Joint Global Coordinator andJoint BookrunnerMay 2007

US$8.0bn


Joint Global coordinator and Joint BookrunnerMay 2007

Russia


Deutsche Bank – track record in the CIS (continued)

€569m


Joint Global Coordinator and Joint BookrunnerDecember 2006

£1.5bn

Initial Public OfferingSole Global Coordinator and Joint BookrunnerDecember 2007

Kazakhstan

US$419m


Joint BookrunnerJune 2006

UkraineUkrainian GovernmentUS$1,000mBond Issuance

Joint BookrunnerJune 2005


What has happened in the equity markets?

Source: Bloomberg, October 2008

0

20

40

60

80

100

120

Jan-08 Feb-08 Mar-08 May-08 Jun-08 Jul-08 Aug-08 Oct-08

Re

ba

sed

S&P DJ Stoxx RTS PFTS

(25.0)%(22.0)%

(63.2)%

(73.2)%

Widespread fears that US will go into recession and that

Europe and EM will be affected

Oil taxation reduction rally in Russia

Sell-off driven by global jitters

Fed intervention

Russia’s economic indicators starting to slow

War conflict in South Ossetia strikes markets

Lehman files for Chapter 11 bankruptcy protection

BofA announces acquisition of Merrill Lynch

US Government takes control of Freddie Mac and Fannie Mae

17th-Sept-08Trading suspended on Russia’s two main stock exchanges due to erratic volatility


Capital markets outlook – Belarus vs other CIS countries

Capital issuance – 2007 Index performance – 2008 YTD

Source: Dealogic, October 2008

38,198.3

1,472.30.0184

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Russia Ukraine Belarus

(US

$b

n)

(62.9)

(69.8)

(0.0)

(80)

(70)

(60)

(50)

(40)

(30)

(20)

(10)

0


(%)


Economy outlook – fundamentals remains strong

7.68.2

6.4

9.2

2.5

8.08.1

7.0

5.5

0

5

10


GD

P g

row

th (

%)

2007 2008F 2009F

GDP growth(a) (%) Inflation (%)

15.312.8

8.49.0

25.3

14.0

9.6

18.8

12.0

0

5

10

15

20

25

30


Yo

Y g

row

th (

%)

(a) Real GDPSource: www.imf.org, World Economic Outlook, October 2008


Key capital raising alternatives

The financing options

Financing alternatives

Time, complexity, stage in corporate lifecycle

Cost of capital

Factors influencing cost

Factors influencing valuation

EquityCapitalMarkets

Primary listing

Secondary listing / Depositary receipts

High yield debt

Eurobonds

Private placements

Venture capital

Bank finance

Investment story

Corporate structure/transparency

Corporate governance

Quality management

Financial history

Market forces

Company readiness

Bankers commission levels

Regulatory requirements

Adviser fees


Comparison of key equity capital raising alternatives

Type Description Characteristics Sale of control or joint venture (sale

of minority stake plus option for control in the future is possible)

Strategic scale (M&A)

Immediate cash act at premium Access to expertise and technologies of

the buyer Loss of control and possibility for equity

upside

Private placement

Sale of minority stake to a limited number of investors (with limited rights to participate in management)

Quicker and simpler way to receive financing

Keep the control No public stakes More expensive financing Participation in the Board may be required

Convertibles Structured debt product with

possibility to convert into the shares Quick way of getting financing Guaranteed return/downside protection

required

IPO

Public offer to a wide pool of investors

Market valuation Open up future M&A / follow on activity Keep the control Long preparation and high one off and

ongoing costs


Comparison of key equity training alternatives

Liquidity

Independent strategy

ValuationLow value

(pre IPO discount)

Higher value(especially if

downside protection)

Market value for minority interest

Maximizing value

M&A PP Convertible IPO

Min

Min

Max

Max


Potential rationale for IPO – pros and cons

Sharing equity upside

Time consuming and more applicable for mature business

High one-off transaction costs– 2% – 6% Broker fee (success based)

– ~US$3m – US$5m (min) – fixed transaction costs

High ongoing costs– audit

– stock exchange

– executive directors

– in-house accounting

Onerous ongoing reporting obligations

Discover the market value

Confirmation of ownership rights

Raising finance

Open up for future M&A activities/exit

Improve transparency and corporate governance

Implementation of long-term management incentive programme

Image enhancement, visibility and brand awareness

Common route for privatisation in many countries

IPO pros IPO cons


Early preparedness for capital raising

Corporatestructure

Corporategovernance

HistoricalIFRS

financial statements

Managementteam

Strategy &investment case

Investorrelations

Practicalissues


Key elements of an equity story

Stability of franchise/market share

Management

Earnings/profitability

Growth

Trackrecord


EV/Revenue

Investors’ approach to valuation

Methodology Applicability

Comparable multiples analysis

EV/EBITDA

Discounted cash flow (DCF)


Valuation positioning – comparable listed peer universe

Belarusiansectorpeers


Price discovery in the IPO

IPOoffer price

Equity/Macro market environment

Review of IPO pipeline

Due diligenceDevelopment of theequity story Analysts presentation

Monitor markets comparables, and new issue trends

Research publication

Valuation ‘price talk’

ManagementroadshowPrice range

Investment banking valuation Research valuation Market valuation

Ma

rke

t d

riv

ers

Co

mp

an

y d

riv

ers Preliminary valuation

assessment

Managementprojections


Key listing alternatives

International CIS

Ord GDR Ord DR Ord GDR Ord Ord RDR

Minsk MoscowLondon Warsaw Frankfurt


Listing alternatives

Access to international capital pool for issuers from less developed markets

Flexible free float Can be recommended for deal size >US$500m 3 year track record and audited IFRS FS is required

No track record needed to obtain a listing More focused on UK rather than Emerging Markets Limited to deal size of US$200m

Main market (ordinary shares)

(GDR)

Deep liquidity for large capital raisings Recommended for deal size exceeding US$1bn 3 year track record + audited IFRS FS 25% min free float is mandatory Full compliance with the combined Code of Corporate Governance


Listing alternatives (continued)

Good option for small and mid-cap companies

Retains emerging markets status

Gain goodwill with local regulators

Meaningless capital raising

Very limited trading

Access to local and international pool of investors

Simpler process vs LSE

Recommended for deal size of up to US$500m

Untested for foreign issuers

Through different listing segments allows CIS companies of different governance standards to list in a market with many peers

raising capital in difficult market conditions

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