26 August 2016
More to come from Russian borrowers and even chance of M&A
Loan bankers expect more activity from Russian borrowers in the final months of the year, as Norilsk Nickel prepares to come to the market and rumours circulate of a large M&A financing.
This year's loan volumes have already pipped full year figures for the last two years. There has been $10.9bn of issuance, compared with $9.5bn in 2014 and $9.9bn in 2015, according to Dealogic, although issuance is still dwarfed by pre-sanctions volumes of $44.9bn in 2013 and as much as $88.5bn in 2007.
A number of bankers expect September to bring increasing deal flow and more lenders joining the market, meaning more competitive pricing.
Banks spooked away in 2014 by the risk of contravening sanctions are returning, especially US and Chinese institutions.
“There was always a core bunch of banks in Russia," said one banker. "We are seeing some counterparties returning and we are seeing prices starting to fall.”
The growing pool of lenders will also attract more borrowers to the market, according to Atanas Djumaliev, head of global commodities at VTB Capital.
“We expect to see more international deals from Russian commodity firms,” said Djumaliev. “International banks are interested in working with Russian companies, as this allows them to broaden their credit portfolio... for the borrowers it is also important to maintain relationships with both international and local lenders so they can access the markets in the future.”
Norilsk Nickel (rated Ba1/BBB-/BBB-) has a $1.5bn five year pre-export finance facility maturing in October and is planning to raise an unsecured loan after the summer, said one relationship banker.
When the loan was agreed in 2011 it paid a margin of 225bp over Libor. Citi, Société Générale, HSBC and UniCredit underwrote the facility.
Barclays, Citi, DZ Bank, HSBC, Helaba, Mitsubishi UFJ Financial Group, Nordea, Société Générale and UniCredit were the bookrunners. Bank of Taiwan and JP Morgan were mandated lead arrangers.
This will be Norilsk’s second deal of the year, after signing a $730m unsecured revolving credit facility from Chinese lenders in January. Bank of China, China Construction Bank and ICBC were mandated lead arrangers.
Moody’s confirmed Norilsk’s Ba1 rating in April and confirmed its negative outlook for the firm.
Meanwhile EuroChem is refinancing a $1.3bn five year pre-export facility, the deal was signed in 2011 and has a margin of 180bp.
BNP Paribas, Bank of America Merrill Lynch, Barclays, Citi, Crédit Agricole, HSBC, ING, Mitsubishi UFJ Financial Group, Natixis, Nordea, RBS, Raiffeisen Bank International and Sumitomo Mitsui Financial Group were mandated lead arrangers on the original EuroChem deal. ING was co-ordinator.
In addition to the Eurochem loan, a number of bankers have said there is a large Russian M&A loan in the pipeline, though they have declined the name the companies involved.
Rosneft, the Russian oil producer, is responsible for the two largest ever Russian loans, for $16.8bn in 2012 and $14.2bn in 2013. Both were for the acquisition of TNK-BP.
Rosneft is currently planning to buy a non-controlling stake in Indian oil refiner Essar Oil. Moody's estimated that Rosneft could pay $2bn-$3bn for the announced 49% non-controlling stake in Essar Oil.
The Essar acquisition is yet to be completed.