Russian steel giant NLMK has postponed a potential pre-export financing (PXF) that it was looking to raise early this year.

The borrower had been in discussions with banks and short-listed four to five institutions as potential lead arrangers. The selected banks were said to include BTMU, Citi, SMBC and UniCredit.

According to market sources, NLMK contacted the target banks stating it was reviewing its investment plans and that it did not want to go ahead with the PXF at this time, given current market conditions.

NLMK had been looking to raise between US$400-500mn via a PXF, with a tenor of three years.

Those familiar with the borrower say NLMK is likely to review its funding strategy and could ultimately opt to raise money via the capital or local markets, as opposed to raising a PXF facility.

The postponement of the transaction does not reflect any deterioration in the quality of NLMK as a borrower, with one source suggesting that the borrower had secured pricing that it was looking for.

Another source remarks: “Pricing was very thin – it was clearly a strong relationship-driven price”.

As yet, NLMK has not responded to GTR’s enquiries related to the potential deal.

Across the market there are a number of Russian borrowers talking with banks about possible new financings, with market sources revealing that oil company Rosneft is potentially looking to raise a PXF deal.

Yet against the uncertainty of the eurozone crisis, Russian borrowers are treading carefully as to when would be the best time to raise financing. Some are speculating that the market might improve in the coming months and may be looking to postpone the transaction until then.

NLMK is one of the world’s leading producers of steel and achieved revenues of US$8.4bn in 2010.

However, conditions in the steel market deteriorated in the third quarter of 2011, with prices falling and demand across European markets slowing down.

The company’s Q4 results have not yet been released; but NLMK had envisaged that steel production output and sales would grow, although prices in the export market would continue to be under pressure due to both weaker economic conditions as well as seasonal factors.