The first Hermes-insured transaction for Citigroup (arranger, lender, agent) in Belarus has closed. The borrower is Mobile TeleSystems (MTS) of Belarus, whose parent is MTS, Russia. The borrower will use the funds to purchase telecoms equipment from Germany.
Hermes is covering US$21.08mn, representing tranche I of a US$45.48mn facility. The agency provided 95% comprehensive insurance for the facility. Some 85% of the Hermes insurance premium was also financed under the Hermes facility.
The maturity is five years door-to-door (1.5 years availability and 3.5 years repayment).
Following MTS’s purchase of Belarus-based assets, the company required long-term funds to finance capacity expansion and equipment purchase from Siemens.
Given Belarus’s country risk, even experienced banks face issues providing long-term financing in a country very little known in the banking community.
Belorussian regulations were apparently particular about the exact borrower versus guarantor obligation in terms of loan documentation.
So Citigroup structured the deal as a five-year financing covered by a guarantee from MTS Russia, the parent of the borrower, which covered any loss incurred through the non-payment of the borrower’s obligations.
Documentation provided for required delineation of MTS Belorussia versus MTS Russian obligations.
“The unique structure allowed Citibank to provide long-term competitive financing at the terms that would normally not be available in the Belarussan’s market,” says a Citibank spokesman. “It is an extremely successful structured trade finance with unique features for the Belorussian market, providing the borrower access to US dollar term financing. The financing has enabled MTS to continue its aggressive regional CIS expansion plan on very competitive terms.”