| LONDON, March 3
LONDON, March 3 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
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
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
"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.
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)