Rusal breaks records


For several very good reasons, the US$2bn credit facility arranged for Russian aluminium giant Rusal last August was one of the most important pre-export facilities to sign in 2006.


First, this is the largest trade-backed facility ever to be arranged for a Russian company outside the oil sector. It is also the largest syndicated deal ever raised for a Russian borrower in the metals sector. Furthermore, the seven-year tenor is the longest ever to have been arranged for any Russian company in the metals sector. The deal also signed behind a backdrop of the anticipated merger between Rusal and Sual.


David Hague, director, metals and mining, global commodity finance, at bookrunner and mandated lead arranger (MLA) ABN AMRO, says: “Margins  in  Russia  have shown a decreasing trend over the last couple of years,  due  to  healthy  growth  of the economy, reducing risk profiles of corporates,  increasing  access  to  diverse  forms  of  capital  and strong competition  in  the  bank and capital markets. Rusal, as a leading company and strong credit, has been at the forefront of this.”


“This deal, ambitious in terms of tenor, was massively oversubscribed in syndication. US$2.6bn of commitments were raised, whereas the initial request from Rusal was for US$$1.5bn,” adds Dominique Fraisse, from the metals and mining department in the natural resources division of MLA Natixis.


The MLAs – ABN AMRO, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas (Suisse), Calyon, Citibank and Natixis – finally settled on a total of US$2bn, split into two US$1bn five and seven-year tranches, paying 110 and 140 basis points over Libor, respectively.


Three pro rata tickets were offered to banks joining in general syndication – lead arrangers received 50bp for a US$75mn ticket over the five-year tranche and 70bp for a US$75mn ticket over the seven-year tranche.


Senior lead managers earned 40bp and 60bp for a US$50mn ticket over the two tranches; and lead managers received 20bp and 40bp for a US$25mn ticket.


When Rusal last tapped the loan market, it signed a facility that contained both a secured and an unsecured tranche. This year, given the size and tenor of this deal, it was decided not to introduce an unsecured portion. To provide the necessary comfort for lenders to agree to this unprecedented facility, the offtaker, Contango (100% Natixis-owned) signed long-term contracts with the trading arm of Rusal, Rual Trade, to cover the full seven years of the facility.


The pricing of the offtake contracts is indexed through the LME aluminium price. Since Contango belongs to Natixis, the need to negotiate long-term contracts through a third party aluminium trader is avoided, and the borrower obtains cheaper debt.


In light of the planned merger between Rusal, Sual and Glencore International, Natixis’ Fraisse continues: “We look at the proposed Rusal-Sual-Glencore merger very favourably. This new group will be the number one worldwide in terms of primary aluminium production and will have an ambitious investment strategy including development into related businesses. This should also create new potential financing opportunities in the future.”


United Company Rusal, the new merged entity, will employ more than 110,000 people in 17 countries on five continents.




Deal information


Borrower: Rusal Ltd
Guarantors: Rual Trade (BVI); Wainfleet Ltd (Madeira)
Amount: US$2bn
Split into:
–         Tranche A: US$1bn
–         Tranche B: US$1bn
Initial MLAs: ABN AMRO; BNP Paribas; BTMU; Calyon; Citigroup; Natixis
MLAs: BayernLB; DZ Bank; HSBC; Mizuho; SMBC
Tenor: Tranche A – 5 years; Tranche B – 7 years
Margin: Tranche A – 1.1%; Tranche B – 1.4%
–         Tranche A: 50bp for US$75mn (lead arrangers); 40bp for US$50mn (arrangers); 20bp for US$25mn (lead managers)
–         Tranche B: 70bp for US$75mn (lead arrangers); 60bp for US$50mn (arrangers); 40bp for US$25mn (lead managers)
Law firm: Denton Wilde Sapte (lenders)
Offtaker: Contango Trading
Date signed: August 2006