* Market stands to lose more than $45 billion in business
* Deals in process now not likely to complete
* Hiatus could last at least a year
* Russia courts cautious Asia, banks with franchises
By Sandrine Bradley
LONDON, May 19 Most Western banks are shunning
Russia's syndicated loan market as a result of the Ukraine
crisis and could stay away for a year or more, despite the
potential loss of more than $45 billion in business.
Fears over the impact of current and threatened future
sanctions, including on the suppliers and balance sheets of the
would-be borrowers, spell the end of hopes deals in process
before the crisis hit may still complete, banking sources said.
These include a $1 billion deal for petrochemicals company
Sibur, and $500 million each in refinancing for potash producer
Uralkali and uranium enrichment firm Tenex.
"Nothing has moved, deal activity has frozen. I would guess
that the best-case scenario is a 12-month hiatus," a
London-based loan banker said.
Russian companies have agreed just under $5 billion of loans
so far this year after raising nearly $50 billion in 2013; the
country consistently ranks as the sixth or seventh-largest
market in the EMEA region, Thomson Reuters LPC data shows.
Most of the credit approvals that had been agreed by lenders
before the Ukraine crisis have now expired on deals that have
not completed. Bankers say that it will take some time before
credit committees become comfortable with Russian risk again.
"I think it is unlikely that any Russian deals will get done
in the short term. The message from above is manage down Russian
exposure when you can, not take on more," a second banker said.
Some borrowers, including Sibur, have effectively stopped
their deals by refusing to add clauses in loan documentation,
insisted on by Western lenders, that stipulate the repayment of
loans if more sanctions are imposed.
The United States and Europe have imposed sanctions on some
individuals and companies over Moscow's annexation of Crimea in
March and threatened broader sectoral sanctions if Russia
disrupts Ukrainian presidential elections planned for Sunday.
Moscow has turned to Asia to fill the gap, with limited
signs of success, and also sought bilateral loans, including
from Western banks with Russian franchises which may be more
prepared to bear short term risks to preserve a long term
Russia's dollar-based syndicated loan market was expected to
be a major source of revenue for banks in 2014. Russian loans
were profitable and paid interest margins of 150 basis points
over Libor before the crisis.
Banks were already struggling to hit revenue targets as the
provision of cut-price revolving credit loans for blue chip
Western companies becomes increasingly commoditised.
"The market (for Russia) is closed. I would speculate that a
return to Russian lending will be a 2015 event. Even if the
situation stabilises, which won't happen in the short term, it
will still take banks months to get comfortable again with
Russian risk," a third banker said.
The hiatus raises questions about how banks will fill the
"How are we going to cover this hole? We don't know, we are
still considering that," said the third banker. Other emerging
markets could stand to benefit, but there has been no evidence
of an increased deal flow there as yet.
Russian borrowers' hopes of raising funding from banks in
Asia also look likely to be dashed by concerns about sanctions.
Gas giant Gazprom plans to update investors on the
company's financial performance and funding plan in Taiwan this
week, only two weeks after it met other Asian investors to
explore ways of raising new loans and bonds.
The company is also trying to extend an existing $500
million loan that is due to mature in July.
Taiwanese banks, usually Asia's most active investors, have
already expressed reservations about joining Russian loans. "Our
lending limits to Russian companies have been frozen," a senior
loan banker from a major Taiwanese government-owned bank said.
"There is little chance that we can join a deal from Gazprom
as the situation in Russia is too complicated," another banker
at a Taiwanese commercial bank said.
One option still open to Russian borrowers looking to raise
capital is bilateral loans with a small group of Western banks
that have bank franchises in Russia.
Metals company Norilsk Nickel, which was trying to
raise a $1 billion syndicated loan when the crisis hit, signed a
five-year unsecured $200 million bilateral loan with ING on May
The company had already signed two five-year bilateral loans
totalling $750 million with UniCredit and Raiffeisenbank in
April. Both banks have Russian franchises.
ING and Deutsche Bank are also still pushing for a $1
billion syndicated deal for steel company Evraz,
according to bankers.
(Editing by Christopher Mangham, Tessa Walsh and Philippa