When picking a fight, it helps if your enemy has fewer friends than you. That’s the tough lesson that Alfa-Access-Renova (AAR) — the consortium of Russian oligarchs that owns half of Russian oil firm TNK-BP — appears to be slowly discovering.
AAR hired Rothschild Group at the beginning of October to advise on a loan to finance the purchase of the half of TNK-BP that it does not own from BP. The firm would probably have to raise upwards of $15bn for the deal, with a portion of that coming from the international syndicated loan market.
But this pits AAR against state-owned oil firm Rosneft, which is also looking to buy BP out and has approached the loan market for a $15bn loan priced at 240bp. Now more than ever, Russian state-owned companies are in favour with European lenders. As these banks continue their slow deleveraging from non-core countries, they can only commit to the top few borrowers in each sector — which in Russia are invariably Kremlin-backed.
Indeed, any lender pinning their colours to AAR’s mast could be considered to be making a declaration of their Russian exit strategy, such is the clout that the Russian state has when it comes to doing deals in the country.
No betting man would back a private Russian company over the Kremlin. And of all the banking community, loans bankers are the most convincing when they say they are not the gamblers of the financial services industry. Big loans have long lead times and are not subject to the whim of good days and bad days; instead, relationships and strategy are the driving force behind many big lending decisions.
And even without considering the impact of the state, Rosneft has a long and well established history of raising large sums from international lenders — the firm has pulled $4.89bn-equivalent out of the market since December last year.
But AAR should not be underestimated. You do not get to become one of the most powerful groups in Russia without some consent from the state. But it’s tough to see how the firm will get the traction it needs to for its bid to get off the ground.
It’s no surprise that AAR approached BP on Monday to say that it was considering selling its stake if Rosneft buys BP’s half. But whether anyone will buy AAR’s piece remains to be seen. Rosneft is the only company that has shown an interest in acquiring TNK-BP assets, and it has its competitor on the ropes.