The Russian oil company TNK-BP signed a US$600mn pre-export finance (PXF) facility in June last year, arranged by initial mandated lead arrangers Crédit Agricole CIB (formerly Calyon), Deutsche Bank, ING and UniCredit.
The structure is a classic pre-export finance (PXF) model including assignment of both export and offtake contracts for Russian export blend crude oil and a pledged offshore collection account. It has a tenor of three years, with a six-month grace period.
Despite a relatively long syndication period, the deal was lauded at the time as one of the first “genuine syndications” seen in the market since the crisis brought activity in Russia to a halt last year. Indeed, getting anyone to lend into Russia during the first half of 2009 was a tough task.
During the first six months of last year, there was limited, if any, underwriting capacity in the market for Russian deals, with most transactions being done on a club basis. Yet, this deal bucked this prevailing trend, with many participants taking smaller tickets at lower levels than the MLAs.
TNK-BP is among the top 10 privately-owned oil companies in the world in terms of crude oil production, and this was the first PXF deal the company had done for several years, having previously tapped the PXF market in 2003. Banks were happy to join this facility given the stability and investment grade rating of the company.
John MacNamara, global head of structured commodity and trade finance at Deutsche Bank, elaborates: “This was something of a ‘coming home’ for the TNK-BP finance team.
“They were the leading masters of the PXF art in the period 1998-2002 and their PXF deals were the first introduction to this structure for many bankers who are today quite senior on the Russian front, so when they announced they would return after an absence of seven years to tap the PXF market it was of course very well-supported at the highest levels.
“Also with their very strong financials, their use of the PXF mechanism here says much more about the state of the international capital markets in early 2009 than it did about TNK-BP.”
The transaction was first agreed upon towards the end of 2008, when initial mandated lead arrangers Calyon and Deutsche Bank signed a US$150mn pre-export finance deal with TNK-BP. These were the only two banks able and willing to fund the deal at this stage at the height of the crisis.
The MLAs completed documentation in a very short timeframe to complete this first tranche before the end of 2008. However, the facility was designed to allow for increases and for further banks to join the facility during 2009.
By April 2009, ING and UniCredit joined the facility at initial mandated lead arranger level. Deutsche Bank increased its commitment to US$90mn, and the remaining MLAs each committed US$75mn.
“This transaction identified the core group of banks to TNK-BP and was a proof for the borrower that it could rely on certain banks which are able to deliver even under adverse market circumstances,” comments Christian Eberl, director, project & commodity finance, loan syndication, financing & advisory, at UniCredit.
Natalia Shukolovich, vice-president of natural resources, ING Bank, was pleased to participate in such a successful deal, commenting: “Despite challenging market circumstances the facility amount reached US$600mn.
“The transaction was the only syndicated facility completed in the Russian natural resources sector at the height of the global financial crisis.”
Other participating banks include Société Générale (as mandated lead arranger), ABN Amro, London branch (as arranger), Helaba Bank and Banca Intesa (both as co-arrangers).
Ilia Poliakov, managing dirctor and deputy head of the Russia and CIS department within the natural resources & energy financing group at Société Générale CIB, further remarks: “Thanks to the strong credit profile of the company, a tight PXF structure, a pricing adapted to the context, and the support of TNK-BP’s core banks, the facility was a success.”
WestLB (as joint mandated lead arranger) and Orgresbank (as joint co-arranger) were the last two banks to take up the additional tickets.
Initial mandated lead arrangers: Crédit Agricole CIB, Deutsche Bank, ING, UniCredit
Mandated lead arrangers: Société Générale, WestLB
Arranger: ABN Amro
Co-arrangers: Helaba, Orgresbank, Banca Intesa
Tenor: 3 years
Law firms: Lovells and Herbert Smith
Date signed: June 2009