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Initial mandated lead arrangers UniCredit, WestLB and RBS arranged a US$1.5bn syndicated pre-export facility for Russian oil company Tatneft, closed in October last year.

The deal proved to be one of the most successfully syndicated pre-export finance loans closed in Russia in 2009 and also represented the biggest new syndicated pre-export finance loan in Russia last year.

“It attracted a wide range of interest from banks including retail banks, and most importantly, Russian banks, such as Bank of Moscow, Gazprombank and Orgres Bank (Nordea) committing to the facility at the MLA level,” comments Tugrul Unsal, director, corporates & structured finance, at WestLB.

The deal was then opened up to general syndication, as Unsal comments: “Bookrunners launched the transaction at US$900mn, the facility was successfully oversubscribed at US$1.9bn and closed at US$1.5bn.

“The facility was praised for the right timing of the syndication, the strength of the pre-export structure, with Vitol joining the facility both as offtaker and lender, and tight facility documentation, and WestLB’s deep understanding of the Russian oil and gas market. “

The facility comprises one three-year and one five-year tranche, both of which are amortising and priced at 5.85% and 6.85% over Libor, respectively.

It is secured by an assignment of crude oil sale and purchase contracts involving Tatneft, Tavit (a dedicated SPV 100% indirectly owned by Vitol Holding), and Vitol. It is further secured by Tavit shares by Vitol and a pledge on several collection accounts.

The funds are being used primarily to support the completion of Tatneft’s important Taneco project, a major refinery and petrochemical complex being constructed in Nizhnekamsk, Tatarstan.

It also set further benchmarks for Russian pre-export financing as it was the first loan syndication which attracted substantial commitments from domestic lenders in Russia, in conjunction with international lenders. In addition to this, trading company and offtaker Vitol was also involved as a lender.

The positive market reaction to the deal is now likely to encourage other Russian borrowers to tap the syndicated loan market as the transaction has demonstrated there is good appetite among banks for strong Russian credits and well-structured deals.

Christian Eberl, director, project & commodity finance loan syndication, at UniCredit, comments on the challenges of co-ordinating such a large-scale deal. “In early 2009, Tatneft entered into first discussions with WestLB and UniCredit as co-ordinators for this financing, at a time when the markets were depressed due to the financial crisis.

“The challenge was to structure the transaction, in spite of such a difficult market environment, in a way to make it attractive and appealing enough for both lenders and the company in order to raise the target facility amount. The two co-ordinators and the company took significant time to develop the structure and to establish the pricing, and this close cooperation worked out very well.”

Annemiek Berends, director, commodity finance, oil & gas, at RBS comments: “A five-year financing on this scale was not available to borrowers in this market until this point, but with the support of the lead banks, the credit story of the borrower and the return on offer, the bookrunners were able to identify a pool of liquidity which enabled an oversubscription and a significant portion of five-year funding.”

Société Générale CIB joined the deal during 2009, and Philippe Landry, managing director and head of the Russia and CIS department, natural resources & energy financing group, comments on the successful syndication: “Such success was due to Tatneft’s low leverage, the important banking pool already working with the company, attractive pricing conditions in a context of spread tightening, a strong security package.”

ING joined the deal at a later stage, contributing a portion of the financing during general syndication. Estefanía Matesanz from ING’s metals and energy finance team, comments: “For us this deal is twice as rewarding as it has enabled ING to further consolidate our solid and long-standing relationship as house bank of Vitol – co-lender and sole offtaker in this transaction.”

Deal information

Borrower: Tatneft
Amount: US$1.5bn
Co-ordinating banks: UniCredit and WestLB
Initial mandated lead arrangers and bookrunners: UniCredit, WestLB and RBS
Mandated lead arrangers: The Bank of Moscow, Nordea, Vitol, BNP Paribas, ING, VTB Western Europe, Heleba, Société Générale CIB, Akbank
Lead arrangers: FBN Bank, KfW Ipex
Arrangers: Erste Bank (London), Banca Intesa
Lead managers: Russian Commercial Bank, FIMBank, Stiching Pensioenfonds Zorg en Welzijn
Tenor: 3 and 5 years
Margin: 5.85% (3 year); 6.85% (5 year)
Facility and security agent: UniCredit
Documentation agent: WestLB
Law firm: Allen & Overy (lenders)
Date signed: October 5, 2009