Russian steelmaker Severstal has secured a €600mn loan from the European Bank for Reconstruction and Development (EBRD) and a syndicate of commercial banks. The financing is a long-term unsecured loan raised for Severstal to implement an energy efficiency programme.

The deal consists of two tranches. The € 150mn Tranche A has a 10-year maturity, and is solely funded by the EBRD. The development bank remains the lender of record for the entire € 600mn transaction.

Tranche B was syndicated out to the commercial market. Calyon, ING Bank and Raiffeisen Zentral Oesterreich were mandated lead arrangers on the deal, originally mandated to raise € 350mn, however after a successful syndication period it was raised to € 450mn.

The first half of the transaction was signed in Moscow last December, where the EBRD signed its € 150mn A loan and the mandated lead arrangers agreed to underwrite € 150mn of the B loan.

Syndication on the € 350mn commercial tranche began soon after the signing, with the deal proving highly popular, so much so, that the underwriters had to cut back their commitment to € 120mn to make room for the high demand from other banks. The tranche was also increased by an extra € 100mn, bringing the deal total to € 600mn.

The pricing of the B loan has remained unchanged since the December signing and stands at 140 basis points over Euribor for the first five years, rising to 160bp over Euribor for the final two years.

Joining the B loan during syndication are BBVA, The Bank of Tokyo-Mitsubishi UFJ, Intesa Sanpaolo and Nordea joined as mandated lead arrangers committing € 35mn each.

Arrangers are Bayerische Landesbank, Caja Madrid, Erste Bank and Fortis Bank, all committing € 25mn.

Co-arrangers, all committing € 15mn, included Caixa Geral de Depositos, Landesbank Baden-Wurttemberg, Mega International Commercial Bank and Taiwan Cooperative Bank.
Joining as lead managers are Bank of Taiwan, Hua Nan Commercial Bank and Land bank of Taiwan, all of which committed € 10mn each.

Severstal agreed to increase the loan, due to the higher than planned costs of its energy efficiency investment programmes. It is estimated that the programme will reduce Severstal's primary energy consumption by 5-10% compared to existing operations with environmental benefits through CO2 emissions reduction of around 600,000 tons per year.