Mechel, a Russian mining and metals company, has closed syndication on a dual-tranche US$2bn loan. The facility was raised to refinance short-term loans taken out for the acquisition of mining assets. Mandated lead arrangers on the transaction are ABN Amro, BNP Paribas, Calyon, Natixis, SMBC, Soci&eaute;té Générale and Commerzbank.
The structure of the facility consists of a secured five-year pre-export finance facility of US$1.7bn. This secured tranche pays a margin of 150 basis points over Libor, and is priced lower than another high profile Russian deal, the US$3.214bn credit facility being raised for Russian steel company Evraz Group. The Evraz transaction also features a substantial pre-export tranche which is priced at 180bp.
The Mechel deal also includes a US$300mn unsecured term loan, paying a margin of 225bp over Libor. This is a significantly higher margin than seen on previous unsecured facilities raised in the Russian market, but with the mandates and structure finalised in late October/Early November 2007, it is priced to reflect an increasingly uncertain market's appetite for Russian risk.
Compared to other Russian facilities being syndicated alongside the Mechel deal, the deal has proved popular. Investors were attracted by its post-credit crisis pricing, and the strength of the underlying mining assets the financing was supporting.
The deal was oversubscribed by US$105mn, but the borrower opted not to increase the facility. A total of 13 banks joined the facility during syndication.
The funds were fully drawn down by Mechel on December 12 (click here to read more in GTR eNews, December 14, 2007).
Mechel won the auction to acquire a block of shares in mining firms Yakutugol, Elgaugol as well as the real estate complex of a railway and road between the Zeysk Railway Station to the Elga coal deposits in October 2007. The acquisition was originally funded through a number of short-term debt facilities financed with the company's own cash as well as a loan from VTB Bank.
The loan is the company's debut international syndicated loan, and is expected to greatly improve its credit portfolio structure and lower its cost of capital.
It is another key development for the company since its IPO on the New York Stock Exchange in 2004.
The company was ranked second in Standard & Poor's transparency and disclosure survey of Russian corporates in 2006. This was an independent survey assessing 70 major Russian firms.
A number of other Russian borrowers are expected to be looking for funding imminently. Norilsk Nickel is due to be tapping the international market soon, and according to sources, the tenders are out in the market. The deal is expected to be noted for its size, rather than any landmark in pricing.
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