Rosneft, seeking to finance Russia’s largest-ever takeover deal, has raised $16.8-billion (U.S.) in bank loans and agreed on long-term trade finance deals with the world’s largest oil traders, Glencore and Vitol.
The state-controlled company said on Monday the loans raised from Western banks would be sufficient to cover its acquisition of the 50 per cent of Anglo-Russian oil firm TNK-BP which it is buying from BP for $27-billion in cash and stock.
The company also said it has agreed terms with Glencore and Vitol to supply them with up to 67 million tonnes of crude oil over five years under a trade finance deal, equivalent to around 270,000 barrels a day of oil.
Rosneft is due to buy the rest of TNK-BP from the AAR consortium of Russian-born business tycoons for $28-billion, completing the takeover of Russia’s third-biggest oil producer to make Rosneft the world’s largest listed oil company, with daily output equivalent to 4.6 million barrels per day.
It was not clear whether the oil supply deals would help pay for the purchase of AAR’s stake in TNK-BP but sources close to Rosneft and potential lenders told Reuters recently that Rosneft had been talks about using future oil exports as collateral to help pay for the TNK-BP deal.
Industry sources said the deals will give Rosneft around $10-billion in advance payments from the traders, who will in turn borrow the money from their banks, in return for securing long-term access to oil from the world’s largest-producing nation.
“The price formula is in line with the prices Rosneft receives for crude at medium-term tenders,” Rosneft’s chief executive Igor Sechin said in a statement.
Assuming the full volumes are delivered, Rosneft would supply the oil traders with around 270,000 barrels per day of oil – or over a tenth of its current output. The pricing terms were not disclosed, nor was the level of prepayment.
If the oil price averages $100 per barrel, the contracts would on paper be worth around $50-billion.
Glencore’s chief executive Ivan Glasenberg said on Monday the announced agreement “further cements our relationship with one of the world’s leading oil and gas companies,” while Vitol’s president and chief executive, Ian Taylor, hailed his deal as a “long term, strategic partnership” with Rosneft.
Rosneft will buy out BP’s half stake in TNK-BP for $17.1-billion in cash and 12.8 per cent of its own shares, bringing down the curtain on a profitable but fractious alliance between BP and the oligarchs struck back in 2003.
In the second leg of the takeover, Rosneft has agreed to pay $28-billion in cash to the AAR consortium, representing billionaires Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik.
Subject to regulatory approvals, the takeover is expected to close in the first half of 2013.
Commenting on the bank financing it had raised for the purchase of BP’s 50 per cent in TNK-BP, Rosneft said it had obtained a 5-year loan of $4.1-billion and a 2-year loan of $12.7-billion from a group of international banks.
The banks include Bank of America Merrill Lynch, Barclays Bank, BNP Paribas, BTMU, Citibank, Credit Agricole, ING Bank, Intesa Sanpaolo Banking Group, J.P. Morgan, Mizuho Corporate Bank, Natixis, Nordea Bank, SMBC, Societe Generale and Unicredit Bank. All are acting as mandated lead arrangers and lenders.
“The loans pay less than 3 per cent in the annual effective rate. The deal is extremely beneficial for Rosneft. There is huge appetite for Rosneft financing among the banks, the deal was agreed in a very short period of time,” a banking source said.
Sources familiar with the matter have said that Rosneft could also refinance up to $10-billion of the cost of the TNK-BP takeover deal on the bond market, ultimately raising more than it needs to close the transaction.
“The company has lots of fundraising options. It has lots of cash on hand, it secured the deal with traders and it successfully issued a Eurobond,” the source said.
Rosneft declined comments on financial details of the deal.