Borrower Briefing - Bitly

Sep 1, 2016 - We will probably roll it for at least ... Etihad closed its first sale-and-leaseback with Sanad in 2011, financing spare GE90 and Rolls Royce Trent.
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1 September 2016

Borrower Briefing Volume going up, pricing going down – Russia is back The signals emanating from the debt market are that international lender appetite for Russian borrowers is growing again, and with that debt pricing is beginning to reverse. Russian loan volume has been hit hard since sanctions (see charts). But volumes are rising again, and pricing for pre-export loans, which have been high, are beginning to contract by around 20bp-30bp. In addition to the general trend outlined by the tradefinanceanalytics stats, specific deals, both recently closed and in the pipeline, demonstrate that sentiment towards Russian lending is growing increasingly positive. Gazprom Marketing & Trading’s (Gazprom M&T) recent $400 million revolving credit managed a 10bp decrease on margin – down to 140bp from 150bp - and a 5bp cut in fees over the borrower’s previous facility. That is a good deal, even compared to the borrower’s non-Russian owned commodity trading peer group where pricing has been either flat or on the up. In addition the deal was more complicated than the norm. “There were a number of cross-border elements arising from the diversity of the lender syndicate and the different jurisdictions in which the GM&T group companies are located [UK, Singapore and Switzerland] and explaining the issues these elements raised was a challenge,” says Nic Tidnam, counsel at Hogan Lovells who advised the joint coordinators on the deal. More surprising than the Gazprom M&T deal is the rumour that Norilsk Nickel is looking to refinance a $1.5 billion five year pre-export finance facility with an unsecured deal. The international unsecured lending market – excluding deals with Chinese lenders - has been a no-go zone for Russian borrowers since US/EU sanctions made lenders too nervous to offer anything other than pre-export loans, even for unsanctioned Russian borrowers. The Norilsk pre-export loan is due to mature in October. Given pre-sanctions many Russian borrowers had started to drop pre-export lending for unsecured facilities, if Norilsk gets an unsecured deal gets signed, a flood of further unsecured borrowing appears likely, at least for those corporates with a rating that will allow it.

Norilsk’s original pre-export deal paid a margin of 225bp over Libor and was lead arranged by Citi, Societe Generale, HSBC and UniCredit. The pricing and bank line-up on an unsecured deal will make for interesting reading in October. For this month’s feature on this topic (Life in the old PXF yet?) please click here.

To see more coverage of trade finance activity in Russia, or to access our market-leading database of verified trade finance transactions, take a trial to Trade Finance Analytics.

Talking shop – borrower comment Borrower: Gazprom Marketing & Trading Sector: Commodities Deal: $400 million revolving credit/working capital facility Tenor: 12 months plus two one-year extension options Lenders: ABN Amro, ING Bank, UniCredit, Raiffeisen Bank, Citi, DBS, DZ Bank, Lloyds, Natixis, Rabobank, Societe Generale, OCBC, Credit Agricole, Deutsche bank, SMBC, Commerzbank, Mizuho, Maybank Financial close: August 2016 Mark Rowland, Director of global treasury and corporate finance, Gazprom M&T: Trade finance: Why has the RCF has gone down to $400 million this year from $500 million last year? Rowland: “We have changed our funding mix. Historically we’ve had a mixture of funding from the bank market and our parent company Gazprom. But this year we’ve moved more towards funding from our parent company. It makes it more efficient for our group in utilising spare cash from within the parent company rather than borrowing externally.” What will the credit line be used for? “General corporate purposes. For us this entails working capital, as we’re not an asset heavy company. The working capital mainly supports the seasonality of the gas business, especially when storages need to be filled for the winter months, which drives the cash flow quite a bit as well as other contingent requirements.” What challenges did you face in securing the deal? “None really. Last year was a little different – while we were not directly affected, sanctions against some Russian entities led to banks considering their appetite for Russian risk. Some banks retracted from some Russian deals or pulled back all Russian business. But some have been very stable and others have seen it as an opportunity to expand Russian business. This deal was very heavily oversubscribed (almost double the final deal size), but we didn’t increase it because we didn’t have a need to. There are two new banks to the deal this year but they’ve been in previous deals and we’ve had long standing relationships with both.” What kind of market factors have affected the commitments from the existing bank list? “Commodity prices don’t seem to have impacted appetite. The structure is not too different from last year – last year we had the coordinating banks at the BMLA level and this year we had the three coordinators and the agent bank at the BMLA level, and one or two other banks stepping up to a higher level.” Have you noticed an uptick in commodity prices and, if so, has this helped you to require less working capital? “General conditions are fairly benign still in terms of macroeconomics. There is some volatility in commodity prices but overall for the banks in energy markets, it was a fairly easy deal to look at. Oil prices are down but the biggest part of our business is the gas business, which is stable and performing well.”

What are your plans for refinancing going forward? “This is a 12 month deal and comes with two one-year extension options. We will probably roll it for at least another year. There is also an accordion option, so we can increase the size by $250 million under the same conditions – if the banks are interested. We have no plans to use it at the moment, but it gives us flexibility.” “Overall it was a very positive deal – fairly straightforward and smooth, based on the appetite we saw and the overall conditions of the deal.”

Mandate mill  Norilsk Nickel is rumoured to be looking to refinance a $1.5 billion five-year pre-export financing with

an unsecured loan before the pre-export deal matures in October.  The financing for Eni’s 3.4m tpa Coral FLNG scheme in Mozambique is due to be launched to banks

and may be out to market as early as next month. The sponsors have been in talks with a pathfinder group of ECAs and DFIs – including Coface, Sace, Kexim, Chexim and China Development Bank – since the start of 2016.  Stanbic Bank Uganda is rumoured to be approaching lenders for a $50 million three-year club loan to fund its trade-related lending. The deal will replace an $85 million 18-month club loan that Stanbic signed in January 2015. The previous loan was provided by Emirates NBD, Al Ahli Bank of Kuwait, Standard Chartered, Al Khalij Commercial Bank and the Commercial Bank of Qatar. The deal paid a 250bp margin and 90bp in fees.  Agri-trader and processor Cofco Agri (previously Noble Agri) has sent out a request for proposals for a $2.7 billion dual-tranche refinancing. The deal – which is expected to comprise one- and three-year tranches – will expand and extend a previous one-year $1.7 billion facility signed in September 2015 by Noble Agri.  Bahrain LNG WLL – jointly owned by Nogaholding (30%), Teekay LNG Partners (30%), Samsung C&T (20%) and Gulf Investment Corporation (20%) – has issued a request for proposals (RFP) for a 20-year commercial bank/ECA facility to partially fund its $655 million receiving and regasification terminal project in the Hidd industrial area of Bahrain.

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Turkish trade fundraisings taking a margin and volume hit The first signs of a tangible pricing hit on Turkish bank trade finance borrowings since the attempted coup in July are beginning to show, with lenders arguing for margin flex clauses to offset the risk of Turkish borrowers being downgraded.

Gazprom M&T refinances 2015 revolver London-based Gazprom Marketing & Trading (M&T) - the energy/commodities trading arm of Gazprom has refinanced its 2015 revolver (which was due to mature this month) with a new $400 million one-year deal.

SunExpress completes US Exim-backed FLL financing The deal is the first time SunExpress has managed to combine US Exim-backed debt with a French tax lease.

JBIC Q1 results confirm major lending drive The results are likely to be even stronger in the coming year.

News in brief Matson Navigation places $511m order for new container vessels Matson plans to raise additional debt financings to part-finance the order.

Etihad closes $265m engine sale-and-leaseback with Sanad Etihad closed its first sale-and-leaseback with Sanad in 2011, financing spare GE90 and Rolls Royce Trent engines.

CAF funds Confital- Bombeo dual carriageway project CAF approved financing in November 2015 for two road projects, the Confital-Bombeo dual carriageway and $172 million for the San Borja-San Ignacio de Moxos highway.

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American Pacific ups RCF to $124m The chemical manufacturer’s loan was increased by $29 million, while the tenor was also extended.

UKEF guarantees £1.2m short term debt for Sphere Global The UKEF cover negates the need for the borrower to put up the cash collateral ordinarily required by a bank to issue a performance bond, thereby freeing up cashflow for the borrower.

Monjasa signs $80m credit facility for oil trading By seizing control of the oil products and logistics at an early stage, Monjasa is increasing the reliability and efficiency of its global supply of maritime fuels.

Altech increases debt and ECA cover targets for HPA project Altech Chemicals has received a summary of senior facility agreement terms and conditions from KfW IPEX-Bank for its proposed Malaysia-based high-purity alumina (HPA) project.

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Gran Tierra Energy closes PetroLatina acquisition The deal is part funded by a bridging loan that includes EDC as a direct lender.

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Royal Industries Indonesia default blamed on suppliers Facility agent Deutsche Bank held a conference call with lenders at the end of last week, after RII defaulted with no advance warning or communication with its banks.

People and places HSBC announces new global export finance head Luketa assumes the position of senior advisor for export and specialised finance.

Wells Fargo launches supply chain origination team The team will be headed by John Schmidt

BACB hires new head of trade finance Jeff Fallon has joined British Arab Commercial Bank (BACB) as head of trade finance.

Deutsche announces a string of trade finance APAC heads Mahesh Kini has been appointed head of trade finance and cash management corporates (TC/CMC) for China.

Natixis promotes Gillet-Lagarde to global head infra and project finance Before joining Natixis, Gillet-Lagarde held various positions in infrastructure finance at Credit Lyonnais, BNP and Entenial (Allianz Group).

XL Catlin poaches Chow from Zurich Prior to Zurich, Chow worked at Atradius Credit Insurance, the Australian Prudential Regulation Authority (APRA), Efic and Westpac.

Sterling National adds O’Grady as MD O’Grady will lead the sales team for Sterling’s ABL division in the Midwest.

Altneu joins Sterling National Bank Stephen Altneu will oversee origination of asset-based loans across the Northeast United States.

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