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Mandated lead arrangers and bookrunners ABN Amro, BNP Paribas, Deutsche Bank and ING closed a US$1.5bn dual-tranche loan for Ukrainian metals and mining group Metinvest in July 2007.

It is the largest ever syndicated loan raised for a corporate borrower in Ukraine. It also sets a new benchmark in pricing, with a margin of 170 basis points over Libor being the best ever rate for a Ukrainian business at the time of signing.

It consists of two tranches: tranche A is a US$1bn structured pre-export finance facility carrying a tenor of five years, while tranche B is a US$500mn revolving trade finance facility carrying a tenor of one year. Tranche A is secured, while Tranche B is unsecured and alone represents the largest ever unsecured corporate loan in Ukraine.

“This deal points to just how attractive Ukrainian companies are at the moment, despite ongoing political uncertainty in the country,” comments Kris van Broekhoven, director of structured commodity trade finance at Deutsche Bank in London.

“And the size and pricing of the deal, as well as the list of lead managers, confirms Metinvest’s position as a leading borrower in the region,” he adds.

Putting together this transaction threw up a number of challenges for the arrangers, as David Hague, director, structured commodity finance at ABN Amro, explains: “The complexities of the transaction included the large number of obligors and the fact that the facility was effectively structured around the existing commodity flows of the Metinvest group. Additionally the quantum of this loan made the transaction challenging as it meant that we had to introduce many lenders to the world of Ukrainian corporates.”

“As well as the notable size and pricing of this facility, it also contains an innovative conduit structure in order to deal with the absence of Ukrainian double taxation treaties,” Van Broekhoven.

“And, to enable funding at the group treasury level, the borrower group consists of both Ukrainian and non-Ukrainian entities.”

The deal also highlights that blue chip companies are still able to raise large amounts of debt if it is being raised to facilitate event-driven financings – as in this case, where the money was being used to finance the acquisition of Italian re-rolling assets.

Eastern Europe and the CIS countries have proved to be fertile ground for trade financiers over the past years – particularly on the commodities front – and this is likely to continue into 2008 and beyond, especially given the difficulties faced by corporates trying to raise funds in other markets.

Metinvest is the leading mining and metals group in Central and Eastern Europe and a key player in the world iron and steel industry.
The group produces over 16mn tonnes of iron ore annually – 30% of Ukraine’s total – and accounts for 20% of the country’s total steel production. The proceeds from the facility will be used for general corporate purposes, refinancing more expensive loans and capital investment – Metinvest is planning to invest more than US$4bn in developing its business over the next five years.

 

Deal Information:

Borrower:

 

Metinvest
Amount: US$1.5bn
Mandated lead arrangers: ABN Amro; BNP Paribas; Deutsche Bank; ING
Tenor: 5 years (tranche A)
1 year (tranche B)
Margin: 170bp
Law firm: Denton Wilde Sapte (lenders)
Date signed: December 2007