Petrochemical company SIBUR has closed Russia’s largest project financing for 2010, a US$1.44bn long-term debt facility for the construction of a new complex in Tobolsk, central Russia. Vnescheconombank (VEB) was mandated lead arranger for the deal which includes seven international banks in its US$1.22bn, 13.5-year senior tranche. Credit Agricole CIB, Deutsche Bank, Intesa Sanpaolo, ING, Societe General CIB, KfW Ipex and SMBC were all involved in the senior tranche, which will be used to finance the acquisition of capital equipment for the new polypropylene production complex. A number of European export credit agencies have provided backing for the tranche, including Italy’s Sace and Germany’s Hermes.
The remaining US$221mn will be provided through a line of credit for a period of nine years, syndicated by the same seven banks involved in the senior tranche.
GTR speaks to Alex Filippovsky, chief financial officer at SIBUR, about the deal: «The deal is the largest project financing in Russia, it is also a unique transaction for the petrochemical industry as a whole.»
«What makes it unique? First, it is the size of the transaction, not just in terms of the overall value, but also in comparison to the size of the company. Second, it is the structure. In a modern industrial history of Russia there are very few project finance deals, and we have succeeded in implementing the classic project finance structure.»
«The deal was negotiated in April 2009 when the debt markets for western institutions were very slow, and for Russian companies they were practically closed. In Russia at that point, you could not raise money.»
The problem, Filippovsky explains, was overcome with an innovative deal structure that meant that instead of foreign banks lending directly to SIBUR, they loaned the money to the state-owned VEB which then provided SIBUR with funding. «We had to negotiate pretty hard,» Filippovsky notes. «VEB communicated with the foreign banks and SIBUR communicated through VEB to make sure the structure and pricing of the deal was beneficial to all parties.»
SIBUR’s head of treasury, Pavel Ananenko, elaborates: «The structure of the deal was heavily influenced by the limited credit appetite of foreign banks for the Russian corporate risk at the peak of the crisis. In this respect the deal structure developed together with VEB was innovative and extremely important to the success of the transaction. VEB ring-fences SIBUR’s and the project’s corporate risk by substituting it with the VEB risk, in other words; Russian sovereign risk.»
Construction of the complex has already begun, with major capital equipment due to be delivered from Q3, 2010, to the final quarter of 2012. On completion, Tobolsk will boast the largest polypropylene plant in Europe, with an installed capacity of 500,000 tonnes per year.
«This is a sizeable amount. To give you a number to compare that too, Russia currently consumes around 750,000 tonnes of polypropylene a year, so this new plant is essentially two-thirds of overall Russian consumption today,» Filippovsky adds.
International Media Relations