City brokers cut and run from scandal-ridden ENRC

David Hellier
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Since the revelations about the lack of corporate governance at the Kazakh-controlled miner ENRC started becoming common currency, there has been a long list of financial advisers from brokers to bankers, lawyers and public relations companies, saying that they turned down working for the FTSE 100 group.

Most people I’ve spoken to over the past few days have said that ENRC, which is majority controlled by a group of Kazakh oligarchs, would have had difficulty passing the Know Your Client rule their organisations adhere to.

Of course, it is easy to be wise after the event and who knows the real reason most of these firms never ended up working with ENRC. Plenty of them attended the beauty parade to run the flotation in 2007 after all.

Two banks who did take the Kazakhstani tenge, however, and who helped bring ENRC to the London stock market, quit yesterday.

No reason was given for their decision but sources said that Deutsche and Morgan Stanley felt increasingly they had no one of stature to talk to following the recent resignation of the executive chairman Mehmet Dalman, who quit saying he had done all he could for the company, which is currently subject to a number of inquiries including a Serious Fraud Office probe.

Deutsche Bank quit just before the May Bank holiday, very shortly after Dalman’s departure and Morgan Stanley followed days later.

No doubt both brokers were feeling distinctly bruised by the association and could not be happy that their presence at the table could be seen to give ENRC some credibility it no longer deserves. But their decision to quit now could hardly have come at a worse time for minority shareholders, who are facing the prospect of receiving a takeover bid, which could easily be a low-ball offer, from the oligarch shareholders.

Let’s hope that Credit Suisse and Lazard, who are advising the independent directors on the buy-out bid, hold their nerve.

By today, or at least early next week, the City’s investment banks will have posted their applications to advise on the potential sale of the Royal Mail.

Favourites to win the lead roles must be Barclays, Goldman Sachs and Bank of America Merrill Lynch, the banks that have been doing the work in getting the company ready for sale, as long as their fee structure finds favour with ministers.

JP Morgan, Nomura, Morgan Stanley and UBS may be conflicted out of a major role because of their work on the Belgian Post.

If there’s going to be a retail element, which seems most likely, there could well be a position for Solid-Solutions.

This City-based group worked with Barclays on the recent Direct Line IPO, which attracted around 170,000 retail investors. Follow me on Twitter @hellierd