A legal first for Russia


A US$155mn structured facility for steel pipe maker TMK last year was the first loan for a Russian borrower backed with an assignment and pledge over the contract with domestic offtakers, registered purely under Russian law and syndicated among both international and Russian banks.


TMK, the largest pipe producer in Russia and one of the three global market leaders, successfully closed the syndicated structured facility on September 25.


“This is an extremely innovative deal,” says Alexander Krasatsev, head of metals and mining at mandated lead arranger, Bank Natexis ZAO. “As the first deal of its kind to be carried out entirely under Russian law, it marks an important step forward for trade finance in this region.”


In syndication, the loan was 47% oversubscribed from the US$105mn originally sought – enabling an increase. This was supported by the fact Russian law was used, which encouraged both Russian banks and the local subsidiaries of international banks into the deal.


Bank Natexis ZAO, Moscow, the Russian banking subsidiary of Natixis, acted as the sole mandated lead arranger, facility agent and bookrunner. Commerzbank, Gazprombank, ING Bank, International Moscow Bank, Société Générale and Banque Société Générale Vostok acted as lead arrangers.


Clifford Chance was the law firm for the lenders while TMK used their in-house legal team.


However, the transaction’s real innovation is found in its security. The lenders have been assigned purely domestic contracts with local offtakers, without export contracts governed by English law. Previously, all syndicated Russian deals in commodities were structured against export receivables, and as such were governed by English, or at least non-Russian, law.


This is the first time that a syndicate of international banks has shown a willingness to take domestic Russian contracts for security. The significant distinction made under Russian law is the concept of “joint and several creditors’, where all of the lenders have one unified claim on the borrower and each lender would hold a share in that claim.


As such, security in this transaction was created in favour of all of the lenders, securing a single (joint and several) claim.


The transaction has a margin of 2.20% per year, which will decrease to 1.6% per year in January 2007 at the request of the borrower and is a 30-month multi-currency (euro and US dollar) amortising structured facility with an option for tenor extension up to 42 months.


“The facility is secured at all times by an assignment and pledge of commercial contracts for the delivery of tubular products by Trade House TMK to prime Russian oil companies and by a pledge of goods in circulation,” Krasatsev explains, “and using Russian law for this deal has allowed us to deliver an innovative and tailored piece of trade financing.”




Deal information


Borrower: CJSC Trade House TMK; OAO TMK
Amount: US$155mn
Mandated lead arranger, facility agent, bookrunner: Bank Natexis ZAO
Tenor: 30 months
Margin: 2.20% over Libor
Senior lead arrangers: Commerzbank, Gazprombank, ING Bank, International Moscow Bank, Société Générale, Banque Société Générale Vostok
Law firms: Clifford Chance (lenders)
Date signed: September 2006