Appetite for Kazakh metals defies crunch

In October 2008, RBS signed a US$340mn pre-export facility with Kazzinc, a major zinc producer in Kazakhstan. The company produces zinc, copper, lead and precious metals and this transaction was designed to support the company’s general corporate needs as well as to refinance the acquisition of a gold asset in Kazakhstan and the related capital expenditure programme.

RBS acted as arranger, agent and offshore security agent, and RBS in Kazakhstan was the local security agent. Trading company Glencore is the offtaker on the transaction.

The facility was one of the largest syndicated deals in an emerging market in the middle of the credit crunch, signed just as the syndications market was effectively shutting down as banks’ appetite for risk rapidly evaporated at the end of 2008.

Commenting on the success of the transaction, Gareth Thomas, head of corporate and structured debt capital markets, CEEMEA, at RBS, notes: “Banks are prepared to invest during these challenging times, as this high-quality syndicate proves. All parties involved must be more confident than ever that the structures being utilised are robust and satisfy lenders’ needs in this changing credit environment.”

A spokesperson from Glencore comments: “The transaction re-affirms that there is appetite for well-structured commodity-linked financings even during the current challenging state of the credit markets.”

Andrew O’Keeffe, counsel at White & Case, the legal counsel for lender RBS, adds: “We are proud to have been involved in such a significant and substantial deal last year, which provided us with exciting challenges. This was one of the largest syndicated deals within the emerging markets in the midst of an economic downturn. The successful closing acts as a tribute to the confidence and strength of our financial institution clients.”

Kazzinc’s operations are mainly located in East Kazakhstan. It was established in 1997 through the merger of Eastern Kazakhstan’s three main non-ferrous metals companies: Ust-Kamenogorsk Lead and Zinc Combinate; Leningorsk Polymetallic Combinate and Zyrianovsk Lead Combinate. All three firms were majority-owned by the government of Kazakhstan.

The controlling block of shares in Kazzinc has since been sold by the state to private investors with Glencore being the main investor.

Deal Information

Borrower: Kazzinc
Amount: US$340mn
Lead arranger: RBS
Lenders: Santander; BHF-Bank; Credit Suisse; Commerzbank; DBS Bank; DZ Bank; Mizuho Corporate Bank
Law firms: White & Case (lenders); Linklaters (borrowers)
Tenor: 36 months
Date signed: October 2008