Evraz syndication due to close

Russia's second-biggest steel company Evraz is due to close general syndication on its US$3.214bn structured multi-tranche credit facility. ABN Amro is the co-ordinating bank on the deal and the other nine mandated lead arrangers are Bank of Tokyo-Mitsubishi UFJ, Barclays Capital, BNP Paribas, Calyon, Commerzbank, Deutsche Bank, ING Bank, SMBC and UBS.

The facility was already signed, funded and fully underwritten by the mandated lead arrangers in November 2007 (Click here to read previous coverage in GTR Jan/Feb 2008).

According to those close to the deal, general syndication has been relatively slow, reflecting general market trends with banks finding it harder to get credit approvals. The Chinese New Year holidays also caused some delays in banks submitting bids.

However, commitments are now starting to come in and syndication is likely to be closed in the next two weeks.

The transaction was priced attractively at 180 basis points, and it is being raised to finance the company's acquisition of Oregon Steel Mills in the US.

It is one of the largest structured loans raised in the Russian market in 2007, comprising of a US$2.714bn five-year pre-export tranche secured on the assignment of trade receivables, and a US$500mn three-year unsecured tranche. The facility is guaranteed by Mastercroft.

Evraz is now set to make another key acquisition, having entered into a share purchase agreement to acquire a stake in Delong Holdings, a mid-cap Chinese steel producer based in the province of Hebei.

The acquisition is worth US$2.5bn and the move highlights a growing trend for large steel producers to acquire Chinese steel mills.

Alexander Frolov, Evraz’s chairman and CEO, comments: "This investment by Evraz in the Chinese steel sector, our first in the Asia Pacific region, is a critical strategic move to expand our global footprint. The Chinese steel market is the largest and fastest growing in the world.”
Initially Evraz will buy a 10% stake in Delong, purchasing shares from Best Decade Holdings, the company’s majority shareholder.

The deal is still pending approval from the Chinese authorities. There have been previous cases where the Chinese government has protested against proposed takeovers of Chinese steel companies, but as yet there have been few signs of resistance.

However, there are a number of other takeover bids in the pipeline. ArcelorMital is also looking to increase its stake in the privately-owned China Oriental.

The  Lakshmi Mittal-owned company's takeover bid is worth US$2bn, pending approvals. It completed its general offer to China Oriental shareholders in early February 2008.