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Petroleum

Western Banks Re-Enter Russian Market with Pre-Export Lending

Strategic Insights

— 1 min read

Western banks are increasingly willing to lend to Russian oil companies, encouraged by rising oil prices and a stable political outlook ahead of the presidential elections on March 26. Despite limited deals, a notable exception is a $40 million loan to Tyumen Oil Co (TNK) in January by South Africa's Standard Bank and Austria's RZB. Pre-export facilities are being signed with a six-month to one-year maturity period and interest rates of five to six percentage points above Libor.

Key Takeaways:

  • Deals are still limited to bilateral facilities in the range of $25 million to $40 million, with most banks unwilling to participate in syndicated deals due to increased risk.
  • The most active lenders currently are RZB, France's Credit Lyonnais, and Germany's West-deutsche Landesbank (West LB).
  • Pre-export facilities have maturity periods of between six months and one year, with interest rates of five to six percentage points above Libor, compared to two to four percentage points above Libor before Russia's financial crisis.
  • Other players, including banks that withdrew from the market after the financial crash, are beginning to return.
  • Bankers expect larger deals and an increasing number of syndications following the presidential elections, but lending rates are not expected to fall to pre-crisis levels.
  • TNK has received a fresh $53 million tranche of a $300 million credit facility arranged by West LB.

Statistics:

  • Deals are limited to bilateral facilities in the range of $25 million to $40 million.
  • The $40 million loan to Tyumen Oil Co (TNK) in January by South Africa's Standard Bank and Austria's RZB has a six-month tenor.
  • Pre-export facilities have interest rates of five to six percentage points above Libor.
  • Maturity periods for pre-export facilities typically range from six months to one year.
  • Total amount of the fresh $53 million tranche of a $300 million credit facility received by TNK is $53 million.
  • Total amount of the credit facility arranged by West LB for TNK is $300 million.

Sources:

  • NC (Newspaper), January 27, p7: "TNK receives fresh $53 million tranche of $300 million credit facility"
  • Reuters: "Western banks re-enter Russian market with pre-export lending"
  • Bloomberg: "Russia's presidential election may boost oil industry lending"

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