October 10, 2014 / 2:56 PM / 5 years ago

Russia's Lukoil asks banks for pre-export loan

LONDON (Reuters) - Russia’s largest independent oil producer Lukoil (LKOH.MM) has asked banks for a new pre-export finance loan which will test bank appetite for lending to Russia, banking sources said on Friday.

A security guard walks in front of Lukoil's refinery offices near the city of Ploiesti, in southern Romania, October 2, 2014. REUTERS/Bogdan Cristel

This is the first loan request from a Russian company since a third round of EU and US sanctions was imposed on Russia in early September and the first for a sanctioned company.

Banks are considering Lukoil’s request for a pre-export loan but it is not yet clear whether lenders will support the deal after Lukoil’s inclusion in the latest round of sanctions.

“The deal is at a very early stage there is a lot of discussion going on around it. The company is just trying to gauge the precise appetite in the market,” a banker said.  

Lukoil is the first privately-owned Russian company to be included in Western sanctions. Although sanctions prohibit the provision of certain technology, they do not affect financing, bankers close to Lukoil said.

“The company has had technology restrictions imposed on it around the delivery of drilling equipment from the West for example, but there is nothing in theory preventing it from raising funds,” the banker said.

Lenders predicted that the Russian loan market would effectively be closed until 2015 after the latest set of sanctions in September, which caused a small group of European banks with franchises in Russia to stop lending.

Some banks are showing renewed interest and are looking at a few requests and would now consider a lender-friendly secured deal for a top company such as Lukoil.

“Lukoil is a Russian gold standard, it is a very good quality firm. If you can’t do a pre-export financing for Lukoil you shouldn’t have an office in Russia,” the banker said.

Lukoil was not immediately available to comment.

FRESH ENTHUSIASM

Banks are also showing fresh enthusiasm for a $300 million refinancing for Promsvyazbank PSBR.MM which asked banks for proposals at the end of September.

Several existing lenders, which said that they would not be able to participate in a new loan for the privately owned Russian bank at that time, are now revisiting it.

“We are doing the deal. We already have the green light for it. We couldn’t see anything really preventing us from doing it,” a second banker said.

Nuclear firm Tenex is also looking for a deal of around $200 million, lower than the $500 million figure that it was seeking before Russia’s annexation of the Crimea in March caused international outrage.

Many bankers are not convinced that the current interest will translate into deals, particularly in the current political environment.

“Banks are watching each other and listening to their compliance people. There will not be a sea change in attitude toward Russian loans, at best attitudes might change from negative to something more neutral,” a third banker said.

Lukoil was last in the market in July when it signed a $1 billion bridge loan with US banks Citigroup and JP Morgan. It is rated BBB- by S&P, Baa2 by Moody’s and BBB by Fitch.

Editing by Tessa Walsh

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