Russia is making a comeback with its first wave of loan deals this year, showing signs that bankers are opening up to the region since sanctions were imposed in 2014.
There have been apparent thaws in the market before, notably late last year - though enthusiasm then was driven partly by a lack of deals elsewhere. Now, though, bankers seem more confident than ever — and borrowers should take advantage.
Russian Railways was the first to break into the market with a $420m club deal with UniCredit, ING and Nordea. The facility, singed at the end of March, may even double with its accordion feature, according to a banker on the deal.
This was the company’s first loan since the sanctions were put in place in 2014, showing that bankers are now slowly dipping their toes back into the Russian deal pool.
“Sanctions were big in 2014. Three years down the road after consulting with lawyers we now know how to operate,” said a banker in London.
“Now that everything is much clearer on the impact of sanctions, [bankers] realise it is not dangerous to play in that market. Why not take advantage of it?” said a second banker.
“This is probably a good time to start underwriting a deal in Russia. The whole market is coming back. The economy is doing better with the recovery in oil prices,” said a third banker in London.
Last week Russian steel producer Metalloinvest and fertiliser maker Acron signed syndicated loans of $1.05bn and $750m respectively, both with the flexibility to extend the amounts at a later date.
Aluminium company Rusal and Siberian Coal and Energy Company SUEK are next to enter the market, according to a banker looking into the deals - but after three years of drought, the market has a lot of thirst to be slaked.
“The problem is that [there] is such a thirst for deals that you really get successful with anything you show the banks,” said a banker on the Metalloinvest deal, which was so oversubscribed that commitments had to be scaled back from over double the launch amount.
That's the nature of supply and demand — but as borrowers are welcomed back and banks eagerly extend balance sheet, that means pressure on pricing, covenants and transaction documentation.
Rush back with open arms — but open eyes as well.