Commerzbank, ING, Natixis and Raiffeisen Bank, acting as mandated lead arrangers, closed a Rb2.8bn (US$114.48mn) structured syndicated facility for ZAO Profit, a leading company in the collection, processing and supply of scrap metal in Russia last year. The facility is the first of its kind, having been secured through the assignment of local receivables under a contract for ferrous scrap delivery, and documented under Russian law. It sets a benchmark for future deals in the international syndicated structured loan market.
The deal has been split into two tranches: a Rb1bn amortising term loan and a Rb1.8bn revolving facility. It is essentially a classical pre-export finance facility but with the added twist that it is secured by an assignment of ZAO Profit’s rights under a prime local receivables offtake contract.
The Rb1bn term loan pays 265 basis points per year, while the revolving facility pays 200bp. The maturity is two years and ING also acted as sole facility agent and documentation agent. Law firm Gide Loyrette Nouel provided counsel to the lenders.
Bernard Zonneveld, managing director, global head, structured metals and energy finance, wholesale banking/structured finance at ING, comments: “The structure of the deal satisfied ZAO Profit’s growing working capital needs of a fast growing company and was instrumental for the reconfirmation of the standing it already has in the international lending market. It also allowed the company to leverage its position of a preferred raw material supplier to Magnitogorsk Iron and Steel Works.”
He adds: “A long-standing, mutually beneficial relationship between the MLAs and ZAO Profit resulted in an excellent understanding by the banks of the company’s needs.”
This structure marks an important step towards arranging secured syndicated financing for domestic suppliers in Russia. The fact that it is also governed by Russian law is another important development.
“In terms of the Russian market, the deal opens the door wider between international borrowers and a number of creditworthy borrowers who can’t necessarily rely on export proceeds to securitise their debt,” concludes Zonneveld.
ZAO Profit consolidates 27 metal scrap collection entities in over 16 regions of Russia. It has a solid 10-year track record in the market, with revenues totalling US$1bn in 2006.
Amount: Rb2.8bn (US$114.48mn)
Mandated lead arrangers: ING; Commerzbank; Natixis; Raiffeisen Bank
Tenor: 2 years
Law firms: Gide Loyrette Nouel
Date signed: June 2007