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9 Oct, 2008 03:44

Smaller Russian financial institutions change hands as credit crunch forces hands

KIT Finance and Sviaz-Bank get new owners as state owned players bail them out.

One of the biggest Russian banks Vnesheconombank is to buy a 98% stake in Sviaz-Bank for a symbolically small 5 thousand rubles or around $200.

Representatives of Vnesheconombank – or VEB – say that up to 25% of all Sviaz-Bank credits are bad debts. VEB has already spent about $2.3 billion dollars to pay off the short-term liabilities of Sviaz-Bank.  $1.8 billion was payed on interbank loans, and the rest was used to regulate the bank's difficulties with repo deals.

And a controlling stake in KIT Finance, one of the biggest Russian victims of the credit crisis, is being sold for just 100 roubles, or 4 dollars.

Russian Investment Group Alrosa and Russian Railways will take a 90% stake in KIT Finance, with its debts to be refinanced by the state. 

Two weeks ago, Gazprombank gave a loan of more than $1 Billion to KIT Finance, which is the biggest player on Russia's domestic debt market.