Doubling up for Rosneft
Russian oil company Rosneft managed to secure two large-scale pre-export loan facilities in 2008. The first facility was syndicated and signed in February 2008, having been mandated at US$2bn, documentation signed at US$3bn and closed at US$3.425bn.
The second facility was structured as a club deal and signed in July. It was mandated at US$1bn, documentation was signed at US$2.85bn and closed at US$3.2bn.
Despite unprecedented market conditions, both deals were heavily oversubscribed. The deals dispelled some market scepticism that Rosneft would not be able to tap the commercial market for these sums of financing in such a tough year.
The second deal also unusually saw western oil companies BP Oil International, Shell International Trading and Shipping Company and Vitol participating as lenders in the club transaction.
Commenting on the success of the deal, John MacNamara, head of structured commodity trade finance at Deutsche Bank, Amsterdam, says: “The size of these deals was significant, as was the fact that they marked the return of western oil majors as financing participants after an absence of several years.
“Deutsche Bank has been leading significant transactions in Russia and the CIS since 1979 for state-owned enterprises and these deals maintain that tradition.”
Remarking on the first transaction, Ian Williams, head of structured trade finance at SMBCE, adds: “In a difficult environment, the appetite for Rosneft debt was clearly demonstrated through this facility, which started at an initial level of US$1bn but eventually closed at US$3.425bn.”
Both deals had an identical security structure, with lenders benefiting from the assignment of export and offtake contracts for Russian export blend crude oil.
The syndicated facilities were being raised to refinance some of the borrower’s short-term bridge loans taken out in 2007 to finance acquisitions of production and refining assets. Specifically, these temporary acquisition funds were used to bid for the remaining assets of former oil company Yukos.
Commenting on the second facility, Olga Valverde, global head of energy, metals and mining in the commodity finance team of Santander, remarks: “This US$3.2bn club deal, which also represented Santander’s first participation in Russia since 2005, was a great success in the middle of the credit crunch.
“The solid structure, proactive re-pricing and the club deal approach, which was very well led by both the borrower and the co-ordinator bank, were key elements for its success. The innovative approach by the borrower to incorporate offtakers as mandated lead arrangers in order to secure their minimum volumes under the offtake contracts was also very important.”
Rosneft has the world’s highest proven reserves of liquid hydrocarbons among public trade companies. The company produced more than 100 million tonnes of crude oil in 2007 and has the highest production growth rate in Russian oil. In July 2006, Rosneft conducted the world’s fifth largest IPO, raising US$10.7bn through selling a 15% stake.
Borrower: Rosneft Oil Company
Amount: US$3.425bn and US$3.2bn
Mandated lead arrangers: (Deal 1) ABN Amro; Barclays Capital; Bank of Tokyo-Mitsubishi; Bayerische Landesbank; BBVA; BNP Paribas; Deutsche Bank; ING Bank; JP Morgan; Mizuho Corporate Bank; Orgresbank; Société Générale CIB; SMBC; WestLB
(Deal 2) BNP Paribas; BP Oil International; Bayerische Hypo-und Vereinsbank; Commerzbank; Deutsche Bank; ING Bank; HSH Nordbank; Orgresbank; Santander; Shell International Trading and Shipping Company; Royal Bank of Scotland; Vitol
Law firm: Denton Wilde Sapte
Tenor: 5 years
Margin: 125bp (July 2008 club facility)
Date signed: February and July 2008