Oil and gas group Lukoil and telecoms company Vimpelcom have lined up banks to lead their $610m and $1bn facilities, as the loan market gears up for yet another busy month for deals for Russian corporate and financial institution borrowers.
The list of transactions set to come to market, which includes steel company Severstal and fertiliser maker Eurochem, continues to grow — despite fears about the escalating political tensions between Russia and the West starting to impact the loan market, adding to worries about a difficult end of the year for syndications as banks begin to reach country limits.
Russian deals are set to flood the market in the next six weeks, starting with state-owned Sberbank.
"The political and diplomatic problems haven’t really started hurting the loan market yet," said one banker. "But it’s not the banks who would pull out first anyway — it’s the come-lately, smaller investors, who will take one look at the headlines and run away. That might eventually filter through to the loan market, when the pool of lenders becomes even smaller."
Bankers also underlined the fact that although the loan market had not reacted to events yet, despite recent borrowers such as UK-Russian oil and gas venture TNK-BP and mining company Mechel being caught up in the storm, the fact that it could keep the bond market from re-opening was very worrying.
"A lot of the big, short term corporate facilities in the loan market this year got done on the back of this idea that they could be taken out and refinanced in the bond market, and that still hasn’t happened yet," said one official. "I have the feeling that once these deals that are coming out now are out of the way, the loan market will pretty much shut down for the year — and yet Russian borrowers will still be asking for money."
Vimpelcom, which already tapped the loan market earlier this with a $3.5bn acquisition facility, is returning for $1bn. Barclays Capital, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Calyon, Commerzbank, SMBC, Standard Bank and WestLB have been lined up to lead the transaction, which is set to launch later this month.
The term loan has a three year tenor, and the borrower is expected to pay a big premium compared to when it came to market in February — on its last loan, of which only $2bn was syndicated, margins were set at 150bp over Libor, and the top ticket on offer paid 80bp.
Pricing forever rising
"Pricing is forever on the rise, and it’s not going to be coming down again any time soon, even though some Russian borrowers seem to think it’s time for pricing to come back down again," said one official, unconnected with the Vimpelcom deal.
The telecom group is not the only borrower to be tapping the loan market for the second time this year — Lukoil has mandated six banks to lead a Eu610m acquisition facility, after it borrowed $1bn early this year, in a deal that was oversubscribed, but not increased.
ABN Amro (RBS), Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Dresdner Kleinwort, ING and WestLB are leading the transaction, which backs Lukoil’s purchase of Turkish oil company Akpet. The deal will be split between three and five year tranches, and is also set to launch later this month.
After a hectic first half of the year for Russian corporate borrowers, the country’s financial institutions also look set to become a lot more active over the next two months.
The deal for Sberbank, which has mandated 12 banks to lead a $1.2bn, three year facility, is the biggest for any Russian bank borrower coming to market soon. It emerged this week that ABN Amro, Bank of Tokyo-Mitsubishi UFJ, Barclays Capital, BNP Paribas, DZ Bank, ING, Intesa Sanpaolo, JP Morgan, SMBC, UniCredit and WestLB are mandated lead arrangers and bookrunners, and are each understood to contributing with take and holds of $100m.
The facility has a margin of 85bp, but the all-in pricing is understood to be well above 100bp.
"Sberbank still has an amazing relationship pull, and the pricing still reflects that, but even the top bank in Russia is having to pay a big premium to come back to market," one banker close to the deal said.
Bank of Moscow is also set to return to market shortly, after sending out requests for a new $500m loan, as is Gazprombank, which is also looking for $500m. The deals will come on top of a series of smaller transactions for second and third tier banks such as Bank Centreinvest, which launched a $60m facility this week
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