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.
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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