Russian Railways, the largest railway company in the world, has signed a US$600mn syndicated term loan facility with various international financial institutions.

The initial mandated lead arrangers and the joint bookrunners are Barclays Capital, Dresdner Kleinwort Wasserstein (DrKW), HSBC Bank and RZB. The facility agent is Dresdner Bank.

This is the first time that Russian Railways has tapped the international loan market. It is also the largest syndicated loan for a transportation company in Central and Eastern Europe.

The transaction was very well received by the investors. The syndicate comprises 28 international financial institutions. The syndication was closed with more than US$900mn raised from the market. Since the borrower did not increase the facility beyond the launch size of US$600mn the initial mandated lead arrangers scaled back all commitments received.

The facility, which is fully underwritten by the initial mandated lead arrangers, consists of a three-year tranche with a bullet repayment, amounting to US$300mn and a five-year tranche of US$300mn with an amortising repayment. The facility will be used for general corporate purposes and represents the debut transaction of Russian Railways in the European capital markets.

The facility carries a margin of 75bp for the three-year tranche and 90bp for the five-year tranche over Libor.

Joinging the initial mandated lead arrangers are: Bank Austria Creditanstalt, Bank of Tokyo-Mitsubishi, Calyon, KfW Ipex-Bank, Mizuho Corporate Bank, Sumitomo Mitsui Banking Corporation Europe and WestLB as mandated lead arrangers.

Joining as arrangers are: Alpha Bank, DekaBank, Deutsche Girozentrale Luxembourg, Depfa Investment Bank, JPMorgan Chase, LRP Landesbank Rheinland-Pfalz, SEB, Banca OPI, Sanpaolo IMI Group, Bawag Bank r Arbeit und Wirtschaft, IKB Deutsche Industriebank, and Ost-West Handelsbank.

ZAO Banca Intesa, Bank of Baroda, Investkredit Bank, Kommunalkredit International and State Bank of India, Antwerp were senior lead managers.

Chiao Tung Bank, offshore banking branch and United Taiwan Bank, Brussels are lead managers.

Russian Railways is a 100% state-owned rail transportation monopoly. It is the largest railway company in the world with revenues in 2004 of US$23bn and operating profit of US$2.4bn. Russian Railways has a market share of 83% of freight (excluding petroleum) and 43% of passenger transportation market in Russia which underlines its immense strategic importance to the Russian economy.

Russian Railways is expected to retain its monopoly ownership of the country’s rail infrastructure, and the vast majority of railroad cars and locomotives.