* Russian syndicated bond market has largely shut down
* European banks with Russian units want to keep business
* U.S., UK banks more reticent due to laws, smaller exposure
By Sandrine Bradley
LONDON, Aug 7 In the face of sanctions that have
frozen international lending to Russia, a small group of
European banks are trying to refinance existing loans to big
companies there in order to protect their business.
They have their work cut out. Washington and Brussels have
excluded Russia's state banks and top energy firms from capital
markets as punishment for the country's support for separatist
rebels in Ukraine and their action - unprecedented in the
post-Cold war era - means even companies not on the blacklist
will struggle to raise large loans outside their domestic
Nonetheless, banks such as Raffeisen and Unicredit
are attempting to refinance existing debt to preserve
their relations with clients and with that, their sizeable
business in the country.
Bank Austria, the central and eastern Europe (CEE) arm of
Italian bank UniCredit, said this week it expects to keep making
solid profits in Russia.
"It is a compliance complexity for sure, a very significant
effort, but I think it is our approach and culture that any
requirement from the sanctions we respect to the extreme
detail," said Chief Financial Officer Francesco Giordano.
Bankers working on a syndicated loan of up to $900 million
for Russian steel company Evraz - led by Dutch bank ING
and Germany's Deutsche Bank - say they hope
it will be signed as soon as this week, though they will have
jumped through many hoops to get it over the line.
"I think the deal will get done, but it is more difficult at
the moment. People are asking a lot of questions around the new
sanctions," one banker told Thomson Reuters Loan Pricing Corp
The loan, a refinancing for Evraz's export business, was
first launched in May, after economic sanctions were initially
imposed on Russia, but before last month's escalation of the
Deutsche and ING declined to comment. Evraz did not respond
to requests for comment.
British, U.S and Japanese banks do not want the legal hassle
of getting involved in syndicated loans for companies in Russia:
The economic warfare between Russia and the west has created a
bureaucratic nightmare, forcing banks to scrutinise every single
payment made through their Russian subsidiaries to ensure they
are in compliance.
Nonetheless some European bankers are persevering, trying to
convince their banks' credit committees to give them the green
light for loans to help their customers refinance their debts.
"We would potentially look at doing deals with unsanctioned
companies," a second banker at one European lender told Thomson
Reuters LPC. "But uncertainty around further sanctions is a big
Demonstrating this uncertainty, Russia's syndicated debt
market, worth $47.2 billion last year, has dried up since
hostilities broke out over the Ukraine. Just two corporate loans
have been signed since March - a $1.15 billion pre-export loan
for Russian iron ore company Metalloinvest and a $450 million
unsecured loan for potash producer Uralkali.
In both cases, European banks dominated the group of banks
that made the deals.
More recently, Russian oil and gas company Slavneft mandated
Austria's Raiffeisen Bank International (RBI) to co-ordinate a
$500 million unsecured syndicated loan in July, which has yet to
Raffeisen, estimated to be the bank most exposed to Russia
with revenues there making up 8 percent of its group assets,
said it was committed to its Russian businesses.
"RBI is happy to support its good clients in difficult
times, of course being fully in line with all compliance rules,"
a spokeswoman said.
Put off not only by the prospect of a bureaucratic headache,
banks have also been spooked by U.S. authorities' recent record
fine against BNP Paribas - $8.9 billion for breaching sanctions
US and British banks with less of a presence in Russia and
tougher sanction laws back home are in particular more reticent.
"From a legal perspective, US and UK operators, banks and
other companies, are going to be particularly cautious," said
Jonathan Fisher, a barrister specialising in financial services
at Devereux Chambers in London.
One British banker said the different approaches taken by the
United States and Europe was complicating matters.
"We are in a hiatus at the moment as we work through what can
and can't be done," he said. "Frankly I wish policy makers would
be clearer on the direction sanctions will take."
Faced with such attitudes, some companies looking to raise
hundreds of millions of dollars in debt are likely to try
alternatives alongside syndicated loans.
Russia's second-largest oil producer Lukoil said
on Thursday it might issue an international bond in the autumn,
breaking the drought that has existed in that market since July.
(Additional reporting by Tessa Walsh of Thomson Reuters LPC,
Michael Shields in Vienna, Jussi Rosendahl in Amsterdam, Maya
Nikolaeva in Paris, Arno Schuetze and Thomas Atkins in
Frankfurt.; Writing by Carmel Crimmins; Editing by Sophie