Ailing Russian loan market hit by fresh US sanctions

Thursday 17 July 2014 18.45
Hopes dashed that Russia's syndicated loan mark is reopening.
Hopes dashed that Russia's syndicated loan mark is reopening.

New US sanctions imposed on Russia for its actions in Ukraine will make it more difficult for Russian companies to refinance existing international loans and has dashed hopes that Russia's syndicated loan market is reopening, bankers said.

Yesterday, Washington announced its toughest sanctions yet, which directly target several Russian companies and financial institutions with close ties to Russian President Vladimir Putin.

The companies include Russia's largest oil producer, Rosneft, its second-largest gas producer, Novatek, its third largest bank, Gazprombank, and state-owned bank Vnesheconombank (VEB).

The four companies have a combined $32.3 billion of syndicated loans outstanding in the next five years, which could be difficult to refinance.
              
The move could also close the market for other Russian loans that are currently in the market and make it impossible to raise any new loans.
              
Gazprombank is the most immediate casualty of the fresh sanctions. The bank is seeking a $1 billion, one-year loan to refinance one of $1.2 billion that is due to mature in September.
              
Bank of America Merrill Lynch, Citi, GoldmanSachs and JP Morgan are among the consortium of international banks that lent it the maturing $1.2 billion.
            

Dutch bank ING, which was also part of the consortium, declined to comment on Gazprombank. A spokesman said ING had been reducing some of its exposures in Russia and Ukraine but remained committed to both countries.

"We are looking at our exposures as a result of the situation in the Ukraine and Russia, but we have a long history in both Russia and the Ukraine and intend to remain a long term player there," a spokesman said.
              
Gazprombank said in a statement that equity and long-term debt with maturities of 90 days or more from US entities were affected.
              
This means that US banks will be unable to lend to the $1 billon one-year loan that Gazprombank is currently seeking.
                           
Slavneft, which is part-owned by Rosneft, has mandated Raiffeisen Bank International to arrange a new $500 million loan.
              
Rosneft is also in the market with a $2 billion oil prepayment deal that it is raising with Swiss energy trading company Vitol.
              
Banks were also due to sign a $1.5-2 billion loan for listed state-backed bank VTB before the new sanctions were announced yesterday.
              
The deal was set to re-open the Russian loan market, as it was the first Russian loan to include US banks since Russia annexed the Crimea.
              
The deal is now expected to be put on hold as US banks reassess their ability to lend.