Buyup of YUKOS Has Become a Matter of International Debt

// Gazprom has Attracted Record Credit from the West in Record Time


Investments in Intervention


Yesterday it was learned that a group of six Western banks led by Deutsche Bank is preparing a record amount (up to €10 billion) of syndicated credit for AO Gazprom to participate in the auction to sell Yuganskneftegaz on December 19. The credit, which has still not been approved by Gazprom's board of directors, is a world record. No one in financial history has ever attracted this much credit without security in three weeks. It is not inconceivable that talks on generating the credit began even before the sale of Yuganskneftegaz was announced.

Quoting unnamed “sources on the financial market”, Reuters News Agency reported yesterday on talks on forming a syndicate to credit Gazprom for the purchase of Yuganskneftegaz. According to their information, the lead managers of the transaction are six banks: ABN AMRO, BNP Paribas, Calyon, Deutsche Bank, Dresdner Kleinwort Wasserstein (DrKW), and J. P. Morgan. The credit will be short-term – for a period of up to a year – and the amount of borrowed funds will be more than $13 billion (€10 billion). It will be unsecured, and the interest rate is expected to be the EURIBOR (the European counterpart of the London Inter Bank Offering Rate or LIBOR) plus 1.3%.

None of the named banks would comment on the Reuters report yesterday. Nevertheless, yesterday, Gazprom's press service confirmed that talks were being held with syndicate representatives. “In general, the list of syndicate lead managers represents the facts. Talks with the banks began immediately after Gazprom's managerial board approved the company's participation in the Yuganskneftegaz auction last Tuesday. If this transaction takes place, it will obviously be a world record for unsecured credit,” a Gazprom spokesman told Kommersant. The company has not confirmed either the amount to be borrowed (according to the Gazprom spokesman, it will be less than €10 billion) or the credit rate.

The company also reported that the unprecedented short-term credit is of a bridge transaction character. That is, in 2005, it will be restructured in one way or another by either being securitized in long-term bonds or restructured on new terms.

Gazprom's board of directors is to discuss the decision to attract credit within a week. Thus, the company could receive the money only a few days before December 19. Gazprom officials maintain that the company is not counting on a postponement of the auction to a later date. We note that the presentation of tax claims for 2003 to Yuganskneftegaz makes Gazprom the only real auction participant – the risks for foreign contenders are too high.

It is possible that work on selecting the creditors began even before the sale of Yuganskneftegaz was announced (this was officially reported on November 19); members of the banking community are divided in their opinion on the possibility of attracting $10-13 billion in unsecured credit in three weeks.

Boris Ginzburg, head of the department of debt instrument analysis at FK Uralsib told Kommersant: “Foreign investors who buy Gazprom's Eurobonds know it very well. In the West, they grant credit to corporations of this level without paper delays, so a period of two to three weeks is ample”. In the words of Yury Morgov, head of the portfolio investment department at Petrocommerce Bank, “if Gazprom's export earnings were used as security for at least part of the financing, credit servicing might be even cheaper”.

On the other hand, the vice president of the board of one of Russia's largest banks told Kommersant on condition of anonymity that “obtaining that kind of credit in two weeks is 99% unrealistic”. In his words, “€10 billion is a huge sum by any standards”, and it is unlikely that foreign banks would have credit lines of that size for Russia by the end of the year.

Furthermore, the purely technical work – distribution of the necessary documents to the syndicate of banks, analysis and amendments on the part of each bank, and a second distribution – takes several weeks. “Either there were some government guarantees here or, most likely, the talks were going on beforehand,” Kommersant's source concluded.

However, Gazprom claims that no government credit guarantees were issued and that subject talks with the banks have been going on for no more than a week.

But then, Russian government guarantees are actually not required for huge credit: according to Kommersant's information, the mastermind of the deal was Deutsche Bank, financial advisor of OOO Gazpromneft and one of the world's largest financial market players. Leading European banks (we note that Dresdner Kleinwort Wasserstein, one of the lead managers for the €10 billion loan, is an appraiser for Rosneft and Yuganskneftegaz) were obviously willing to let Gazprom monopolize attractive assets in the Russian oil industry only on condition of political approval of such transactions by governments of the EU countries. The formation of Gazpromneft, which will combine more than 45% of oil deliveries to the EU within three to five years, will redraw the oil map of Europe; and €10 billion is not an overly large amount to start the process.

by Dmitry Butrin, Pavel Prezhentsev, Yuliya Chaikina

(From Kommersant, 12.08.2004)
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Comment : Western investors,don't forget...