Russia’s largest petrochemicals and gas processing company Sibur has met all its financing needs for the next 18 months, despite being effectively shut out of the Western international loan market for over a year, CFO Pavel Malyi said in an interview in London last week.
Malyi said that Sibur had managed to fulfil all its funding needs since the onset of the crisis through bilateral loans, ECA-backed financings and Russian domestic bank borrowings. Sibur’s shorter-term corporate borrowing needs have mainly been achieved through bilateral loans with its core group of European relationship banks.
Those deals collectively have matched what the company would normally raise through the syndicated loan market, Malyi said. “We haven’t done an international syndication since the crisis began, but our core group of European relationship banks have done their utmost to keep doing business with us. They have renewed their country limits and are still working with us, just in different formats such as bilateral deals in similar volumes to what we would raise in the syndicated market,” said Malyi. US banks, more restricted by what they can do, even with non-sanctioned entities such as Sibur, have not supplied any new credit facilities but have done what they can, according to Malyi, to preserve and renew existing business.
European banks have also maintained their relationships in Russia, but in contrast those in the UK have not played the preservation game: “They [UK banks] actively shut down business lines and moved out of Russia,” Malyi said. Sibur will be carefully analysing its banking relationships throughout the crisis, he added. “It is an interesting test of our long-term relationships. Once the crisis ends we will be faithful to those who were loyal to us,” he said.
Russian banks have also become core lenders to Russian corporates during the crisis and will remain systemically important to these companies while Russia gets used to the ‘new normal’, Malyi said. “Russian banks have come to prominence during the crisis: they are not scared of deploying their balance sheets. There is a growing level of professionalism and sophistication in Russian banks – banks like Sberbank and Alfa Bank are doing really well, they are developing new products and new ways of serving their clients,” he said. Sibur’s longer-term funding needs for its operational projects have been met with the help of export credit agency (ECA) backed deals.
In December 2014, the company signed a €1.58bn long-term facility backed by German export credit agency Euler Hermes, with a consortium of European banks for its steam cracker ZapSibNeftekhim (ZapSib-2) project. Sibur is also in talks with banks over a new smaller facility with French ECA Coface also related to the ZapSib-2 project, which Malyi says will be in the ‘hundreds of millions’.
“Access to funding has not been an issue – we are doing exactly the ECA-backed deals that we need to be doing. We are exactly where we should be in terms of our investment strategy. Assuming the market stays where it is now, we are covered for the next 18 months,” he said.
In a wider context Malyi argues that Sibur’s financial situation is similar for other large non-sanctioned export-orientated Russian corporates. “They will weather the crisis fairly well,” he said. “They have all been very diligent in keeping on good terms with their creditors. The real victims of the sanctions are the Western banks and those Russian corporates directly sanctioned.”