Russia's PIK Group has dropped $1bn fund plan

Russia’s PIK Group has scrapped plans to raise a $1 billion real estate fund owing to the fall-out from the credit crunch.

A spokeswoman for the Moscow-based company which is listed on the London stock exchange said the decision to “close down the fund” was taken earlier this year due to adverse market conditions.

It had planned to tap foreign investors for a vehicle that would have invested mainly in commercial property as opposed to residential assets for which it is best-known.

Since the decision was hatched last year to raise a fund, the company has run into difficulties stemming from the downturn in the real estate market and its level of debt.  

Reuters reported just yesterday that several creditors have sued PIK for overdue debts, including state bank VTB for 2.7 billion roubles ($86.6 million) and a division of Renaissance Capital.

PIK, which owns around $4.8 billion of assets, has a $1.3 billion debt pile.

Last year it was one of a number of top Russian companies to receive a total of $10 billion in emergency funding from state-owned Vneshekonombank (VEB).

Vladimir Putin, the Russian prime minister warned last month that companies the state had helped would not be able to extend  indefinitely the loans they had received.

In May, PIK revealed it had made an annual loss of  $167 million, and had been making cost cuts, and had put on hold plans to enter new Russian cities and new countries in the CIS.

“We are currently working hard to restructure group debt and management is in talks with existing lenders regarding the possible replacement of short-term borrowings with longer term debt,”  said co-founder     
Kirill Pisarev.