Economic Hitman 2.0

By Martin Arnold in London and Katya Gorchinskaya in Kiev
Published: November 29 2008 02:00 | Last updated: November 29 2008 02:00
FT Weekend

Blackstone has been appointed as a financial adviser to Ukraine, highlighting the US private equity group's ambition to become the consultant of choice for countries faced with financial crisis.

Ukraine's balance of payments is deteriorating amid falling prices for steel, its major export, and rising prices for gas imports from Russia. In October, its economy contracted 2.1 per cent, according to Commerzbank.

Ukraine's government hired Blackstone as an adviser last week alongside Credit Suisse, joining the list of countries that have called on the New York private equity group, which has advised Iceland.

"Blackstone have followed the food chain from hedge funds to banks to banking systems and now to entire countries," said a person familiar with the private equity group, which advised Northern Rock on its UK state bail-out.

According to a Ukraine cabinet document seen by the Financial Times, Blackstone will be paid a monthly fee of €1m ($1.26m) and a further €3.5m on completion of the contract. It will be paid all expenses, including bodyguards for staff.

The contract, dated November 17, says Blackstone will co-ordinate Ukraine's $16.4bn standby loan from the International Monetary Fund, mediate between the government, the IMF and the World Bank and work on the country's stabilisation plan.

It is also responsible for handling talks with Ukraine's creditors and developing a communication strategy for the stabilisation plan. The contract says Blackstone is not responsible for implementing the stabilisation plan or for its success.

Blackstone's team of advisers to Ukraine's government is being led by Martin Gudgeon, the London head of the private equity group's fast-growing restructuring advisory business in Europe.

Blackstone is thought to be advising on the structure of Ukraine's debt and how to optimise it, possibly through early repayment.

Volodymyr Lytvyn, deputy finance minister, said: "This is a good time to revise our debt and take the opportunity to start paying it early at a reduced rate."