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Signed in November 2007 and involving a group of 10 banks, the US$3.2bn multi-tranche credit facility for Evraz Group represents the largest metals pre-export financing deal completed in Russia to date.

The deal was co-ordinated by ABN Amro and involved nine other arranging banks – Bank of Tokyo-Mitsubishi, Barclays Capital, BNP Paribas, Calyon, Commerzbank, Deutsche Bank, ING, Sumitomo Mitsui and UBS. Deutsche Bank also acted as facility agent and security trustee for the syndicate.

The facility pays a margin of 180bp over Libor and comprises two tranches: tranche A consists of a US$2.714bn loan secured on trade receivables and carries a tenor of five years, while tranche B consists of a US$500mn unsecured loan with a tenor of three years.

“The sheer scale of this deal is its most notable aspect,” says Mehmet Saydam, director, structured commodity and trade finance at Deutsche Bank. “However, the list of participating banks is also impressive, containing big names from both Europe and Japan. And the deal was structured in some extremely demanding international market conditions.”

David Hague, director, structured commodity finance at ABN Amro, adds: “The size and speed of the transaction and the size of the MLA group all help to make this deal a landmark transaction. This deal probably started the current vogue for large structured credit facilities to have large MLA groups.”

Penny Smith, head of emerging markets, corporate origination at Commerzbank in London, further remarks: “One big achievement with this deal was getting it done at the end of last year when the markets were in such disarray. To do it within three weeks or so from the decision that the borrower wanted to do it, to actually getting the money was also quite phenomenal.”

The facility is guaranteed by Evraz’s wholly-owned subsidiary, Mastercroft, and Evraz Group plans to apply US$1.8bn of the proceeds to repay a bridging loan raised earlier in 2007 to finance the acquisition of Oregon Steel Mills in the US. The remainder is to be used for general corporate purposes.

The transaction was also the first time Evraz was able to use all the geographical locations and industrial logic of its subsidiaries, both in Russia and offshore, to enhance the nature of a structured credit facility.

Hague elaborates: “By the re-rolling assets acting as offtakers, East Metals acting as a trader, and Zapsib and NTMK acting as producers, Evraz was able to leverage the international nature of their assets to bring into play all aspects of the steel value chain to enhance the credit structure of the facility, which is crucial when confronted with the uncertainties that exist in the credit markets at this time, and the timeframe involved.”

Evraz Group is one of the world’s leading vertically integrated mining and steel production businesses with most of its operations based in Russia. The group produced over 16.1mn tonnes of crude steel in 2006, achieving around US$8.3bn in revenue. It aims to become the lowest cost steel producer in Russia and the CIS.

Deal Information:

 

Borrower:

 

Evraz
Amount: US$3.2bn
Mandated lead arrangers:
ABN Amro; Bank of Tokyo-Mitsubishi; Barclays Capital; BNP Paribas; Calyon; Commerzbank; Deutsche Bank; ING; Sumitomo Mitsui; UBS
Tenor: 3-5 years
Margin: 180bp
Law firms: Clifford Chance (banks); Gottlieb Steen and Hamilton (borrower)
Date signed: November 2007