VTB to raise dual tranche syndicated loan

VTB Bank has mandated The Bank of Tokyo-Mitsubishi UFJ, Barclays Capital, BayernLB, BNP Paribas, Citi, Deutsche Bank, Intesa Sanpaolo Bank Ireland, JPMorgan, Mizuho Corporate Bank, and Sumitomo Mitsui Banking Corporation Europe to arrange a US$1bn dual tranche syndicated term loan facility.

It has been structured as a three-year and 18-month dual tranche facility. The longer portion of the deal carries a margin of 65 basis points over Libor, and the 18-month tranche carries a margin of 60bp over Libor.

The mandated lead arrangers are financing the three-year portion, with only the 18-month portion being opened up to general syndication.

The launch of this transaction at the end of April followed comments made by Andrei Kostin, the president of VTB, calling for Russia to release cash from its sovereign wealth fund to provide long-term financing to the Russian banking sector given the lack of international financing sources in the aftermath of the credit crunch. Speaking to the Financial Times in late April, Kostin explained that although the problem of short-term liquidity in Russia had been solved, there was still a "substantial lack” of longer term sources of funding.

Opponents to the release of sovereign wealth funds argue that such a move would drive up inflation, and a better option would be for banks to cut back on their lending.

In the interview, Kostin added that he had no plans to slowdown VTB's growth, stating that the bank had enough liquidity to support its ambitious growth plans.

VTB is the second largest bank group in Russia by assets (US$92.6bn) and deposits (US$37.1bn). The Russian Federation is VTB's largest shareholder with a 77.5% stake, and is the controlling shareholder of the group.