RLPC-Russian firms face pricier loans, delays over Ukraine crisis

LONDON, March 3 Mon Mar 3, 2014 11:11am EST

LONDON, March 3 (Reuters) - Russian companies face higher interest rates and delays on billions of dollars of loans as foreign banks become more wary of lending to them due to the escalating crisis in Ukraine.

Bankers said on Monday the uncertainty sparked by Russia's military intervention in its neighbour could also have wider implications for Europe's leveraged loan market that finances private equity buyouts, saying at least one arranging bank had held emergency meetings about underwriting such loans.

"I'm not surprised there are emergency meetings on underwrites, if I was to de-risk, I would be looking at them," one senior loan banker said, on condition of anonymity.

The focus is firmly on Russia, though, and the loan market's changing perception to risk in the country, with nearly 20 new loans for high-profile Russian companies in the pipeline.

"This will definitely affect Russian (loan) pricing as the risk is now considerably different," the senior banker said.

Talks on five new Russian loans totalling up to $5.5 billion are in advanced stages, including a $2 billion, three-year facility for Vimpelcom, Russia's third-biggest mobile operator, which will refinance existing debt and increase working capital.

Other Russian firms seeking loans of up to $1 billion include petrochemical company Sibur, Novolipetsk Steel (NLMK) and Russia's largest iron ore producer Metalloinvest, while potash producer Uralkali is in talks for a $500 million refinancing.

Negotiations also started last week on a possible multi-billion dollar acquisition financing for a top Russian company, a second senior banker said.

All of these loans could be subject to delay as banks assesses the potential impact of the developing crisis.

"Quite frankly, we are very likely to be told to stop if the political situation escalates. It is a shame really as looks as if it there would be some nice activity in Russia this year," a third senior banker said.

Arranging banks have been pitching aggressively to Russian companies this year. Oil giant Rosneft made two substantial repayments on jumbo bridge loans which freed up country limits for lenders.

European banks that withdrew from Russia in the last five years after funding costs soared and banks refocused on domestic lending, including French banks, have been returning to lend to Russian companies in recent months.

The increased competition for mandates has put downward pressure on loan pricing, which bankers now expect could start to climb.

"The main knock on effect will be pricing, it will not stay where it is," the third banker said.

Bridge loans to bond issues for acquisitions by Russian companies could also be either off the table given the current volatility or more expensive as banks are less able to count on the bond market.

CONTAGION?

A global sell-off in risky assets is in full swing, with longer-dated U.S. Treasuries, which are viewed as a safe haven, in demand and equity futures sharply down.

A number of high-profile bond deals for financial institutions could also be postponed. The rising tensions have driven the cost of insuring unsecured and subordinated financial debt up and put a lid on primary issuance.

Western Europe's riskier leveraged loan market that finances private equity buyouts is particularly vulnerable to any changes in attitudes towards risk.

Deals on the way include potential leveraged buyout loans for French broadcasting masts operator TDF, French veterinary pharmaceuticals firm Ceva Sante and Europe's second-largest card payments services company Nets.

Banks will be wary of committing to new loans until there is more clarity around developments.

"So far there is no obvious retreat in the (loan) market but the next 24 hours will be critical in assessing the situation," the second senior banker said. (Additional reporting by Claire Ruckin; Writing by Tessa Walsh; Editing by Mark Potter)