Russian oil company OAO Rosneft is in talks with up to 20 banks about loans totalling $33.5-billion (U.S.) to back its $55-billion acquisition of rival TNK-BP, bankers said.
Around 10 banks, likely to include three U.S. banks, three Japanese, a couple of British and one or two French banks, were expected to commit around $2.25-billion each.
Other international banks were also likely to commit smaller amounts, which could push the total loan size to $35-billion, the bankers said on Wednesday.
At $33.5-billion, it would be Europe's ninth-biggest syndicated loan and the largest for a Russian borrower, according to Thomson Reuters LPC data.
Rosneft, which was not available to comment, is arranging the loans and does not require banks to underwrite the financing, saving it hefty underwriting fees.
Strong appetite from lenders also means Rosneft has been able to dictate fairly aggressive terms and pricing on the deal, the bankers said.
"There is so much demand they do not need to pay for the loan to be underwritten, as they do not need that security from the banks. They will reel everyone in and raise as much as they can," a second banker said.
The loan will include a bridge loan of $24.5-billion that will be taken out by a bond, likely to be issued next year and there will also be an $8-billion, five-year term loan.
While banks do not expect to generate many fees on the loans, their presence in the deal could lead to more lucrative and profitable bond business.
"It is not terribly interesting for the banks in reality, but the bond business is appealing," the first banker said.
On top of the syndicated loan, four or five Russian banks were expected to provide around $1-billion each in bilateral loans to Rosneft.
Rosneft is likely to commit $7.5-billion in cash to fund the takeover, one of the bankers added.
Rosneft had originally sought $15-billion in loans for its acquisition of BP's stake in TNK-BP, but the loan has increased to purchase AAR's stake.
Rosneft will buy BP's 50-per-cent stake for around $27-billion in cash and stock. It will also acquire the stake held by the AAR consortium of four Soviet-born billionaires, who control another half of TNK-BP, for $28-billion cash.