The Russian billionaire who saw the crisis coming
By Mark Thompson and Robin Paxton
MOSCOW (Reuters) - In a few short months, Russia's business elite have seen their billion-dollar fortunes crumble.
Not Mikhail Prokhorov. He says he saw the crisis coming.
While many of his peers tap the Kremlin to repay debts incurred to expand their empires, the 43-year-old former banker and mining executive sits pretty on the $10 billion earned from the sale of assets just before the bull market turned.
"The whole world suffered from optimism. Like every system and every model, it has come to an end," Prokhorov, now widely regarded as Russia's richest man, told Reuters in an interview.
"It was inevitable the problems with real estate in the United States would touch the banking system."
Prokhorov, in the trademark pinstripes of the banking profession where he learned his trade, stands two meters tall. Flush with cash in a debt-laden market, he has snapped up half of leading Russian investment bank Renaissance Capital for only $500 million.
With many good companies over-borrowed, Prokhorov said he was prepared to refinance loans.
"I'm ready to refinance you: 51 percent on the table. This is the business for Russia for the time being."
Convinced other deals will arrive, he is in no rush, and instead must quell the entrepreneurial drive of young employees.
"What is the risk for me? It's to be too active," said Prokhorov, now sprouting a few grey flecks in his dark hair.
"If I can paraphrase Chinese philosophy: the good and experienced soldier needs to wait and have a look on the river for the good assets coming. The best thing now is to wait."
Russian stocks have plunged 70 percent from May peaks and the government has spent one quarter of its foreign exchange reserves propping up the economy. Falling crude prices promise further economic hardship for the world's No. 2 oil exporter.
Prokhorov's business model today, applied throughout his Onexim investment group, is to keep control of assets while staying debt-free. Mining company Polyus Gold (PLZL.MM: Quote, Profile, Research, Stock Buzz), of which he owns 30 percent, always keeps $1 billion on its books.
"I will not, for the time being, invest in portfolio investments. You can't predict them," he said.
Prokhorov, who enjoys biathlon and kickboxing, chooses not to reveal his net worth.
"It's very rude to ask a girl her age. It's much worse to ask how much cash you have," he said in his central Moscow office, topped by a glass dome and ringed by white columns, where a plasma TV screen covers most of one wall.
In April, Prokhorov earned billions of dollars selling key assets. He offloaded his one-quarter stake in Norilsk Nickel (GMKN.MM: Quote, Profile, Research, Stock Buzz), the Arctic miner that supplies 20 percent of the world's nickel, to United Company RUSAL just before its value dived.
Prokhorov also sold real estate, banking and insurance assets to Vladimir Potanin, the culmination of a 15-month divorce between the ex-partners that captured public attention in 2007 when Prokhorov was detained briefly in a French ski resort in a prostitution probe. He was released without charge.
Renaissance Capital, he said, retains a share capital of around $1.4 billion. It will continue to focus on emerging markets and is well-placed to attract the best talent from other investment banks during the financial crisis.
"Now is an excellent opportunity to invite the best people from investment banks, like Goldman Sachs, like JPMorgan and others, to these kinds of markets," he said. "Investment banking is not capital; it's relations and ideas."
Many businesses, Prokhorov said, were in denial about the depth of the financial crisis and the toll it will take. He urged troubled businesses, particularly those in the property sector, to cut their losses in order to ensure survival.
"They are fighting for prices. They are crazy -- there are no buyers," he said of the real estate sector. "It's not enough to keep 25 buildings and end up bankrupt. Keep five, save your core team, and at least you will receive a small cashflow."
FIGHT FOR SURVIVAL
The crisis, said Prokhorov, was hitting people at all levels of society and the government's $200 billion-plus rescue package would have only a limited effect as cash gets trapped in the banking system.
"The banks will never pass this liquidity to the real economy," he said. "If I were a banker, I would do the same. Why? Because the banks' losses are much bigger."
But Russia's billionaires, who built their empires in the decade of chaos after the Soviet Union's collapse, are resilient enough to bounce back -- provided they can retain their assets.
"One of the competitive advantages of Russia is that some businessmen are self-made. They faced a lot of difficulties. They are not afraid of any situation and will fight to the end."
Oleg Deripaska, ranked Russia's richest man in May by Forbes magazine, and Mikhail Fridman are among the billionaires to net emergency loans from state banks in order to refinance Western loans against which their assets had been placed as collateral.
"If they can keep their assets, those who have a competitive advantage will come back in the future," Prokhorov said. "The main task is not to lose them."
'NOT GEORGE MICHAEL'
Prokhorov pays no attention to rich lists -- "I never think about this bullshit," he says -- and says he will shun the limelight after reshaping his post-crisis financial empire.
"I need to be more public for the time being, but in the future I plan to be in the shadows," he said. "When I'm in a restaurant, I don't want everybody to stop eating and look. I'm not George Michael."
But the billionaire -- Russia's most eligible bachelor -- laughs off any suggestion he might wish to retire.
"I wake up every morning with one desire: to go to work. What's my girl called? She's called 'My work'."
(Additional reporting by Michael Stott and Polina Devitt, writing by Robin Paxton; Editing by David Cowell)