Banks put Russian deals on hold
Banks put Russian deals on hold
IFR 2024 15 March to 21 March 2014 | By
Sandrine Bradley
The Russian syndicated loan market has ground to a halt with billions of dollars of loans in the pipeline as bankers await clarity on the rapidly changing Ukraine crisis and the possibility of economic sanctions. Banks have halted all new loan commitments, including deals that have already been approved by credit committees.
Nearly 20 new loans for Russian companies were in process in early March. Talks were advanced on US$5.5bn of new loans, including a US$2bn three-year facility for VimpelCom, Russia’s third-biggest mobile operator.
Commitment deadlines on at least one major loan were not met last week after only two of the 10 banks invited had responded by the deadline, bankers said.
“Banks are saying that they’re still open but they are not doing any business. Primary Russian deals are on hold,” a senior banker said.
As well as VimpelCom, other Russian companies with loans of up to US$1bn in progress include petrochemicals firm Sibur, Novolipetsk Steel and iron ore producer Metalloinvest. P
otash producer Uralkali is seeking a US$500m refinancing.
“No one in their right mind is going to ring up a client now and say they are good for the money; the client doesn’t even expect that,” a second senior banker said.
Pricing on loans to Russian borrowers had been falling for the last 12 months as international banks showed renewed interest in the country, but it is now likely to rise after Russia’s moves in Ukraine, bankers said.
“No one is signing any documents without the inclusion of US, UN, EU and UK sanctions protections. This has been in standard documents for a while but the Russia situation has highlighted the case for including all Russian names”
Borrowers including Sibur and Uralkali are now facing potentially higher costs after initially seeking to beat Gazpromneft’s benchmark pricing of 150bp last December.
Bankers are taking a “wait and see approach” to changing terms and conditions on the loans, including repricing, until the implications of the political situation are clearer.
“There is no point repricing if you don’t know how this is going to play out. Are you repricing to the crisis and sanctions or a more moderate level?” said a loan syndicate head.
Sanction clauses
Lenders are reviewing existing commitments and are building extra protection into the loan documentation to cover the possibility of economic sanctions. International banks have been discussing the inclusion of Russia in existing economic sanction clauses that were originally put in place to deal with Iran, Libya and North Korea.
The clauses address the legality of lending once economic sanctions have been imposed and allow loan agreements to be cancelled if that happens.
“No one is signing any documents without the inclusion of US, UN, EU and UK sanctions protections. This has been in standard documents for a while but the Russia situation has highlighted the case for including all Russian names,” a third senior banker said.
Banks are also concerned that there may be a clampdown on US dollar payments if sanctions are enforced, as most internationally syndicated Russian loans are denominated in dollars.
“Banks are getting nervous about what might happen. I don’t think institutions have views yet as it’s all evolving,” the loan syndicate head said.
https://www.ifre.com/banks-put-russian-deals-on-hold/21136503.article