Narrative
Full Description
Project narrative
On September 29, 2011, United Company RUSAL Plc — a limited liability company that is legally incorporated in Jersey, headquartered in Russia, and owned by Oleg Deripaska — signed a $4.75 billion aluminium pre-export finance (PxF) term facility agreement with a syndicate of banks for debt refinancing purposes. The loan consisted of two tranches: a $3.75 billion tranche (known as ‘Tranche A’) that carried a 1.25 year grace period, a 5-year maturity, and an interest rate of 3-month LIBOR plus a margin (based on Total Net Debt/EBIDTA ratio to be revised quarterly); and a $1 billion tranche (known as ‘Tranche B’) that carried a 5.25 year grace period, a 7-year maturity, and an interest rate of 3-month LIBOR plus a 3.85% margin. Both tranches were to be repaid by the borrower in equal quarterly installments. Participants in the syndicate included China Development Bank (CDB), Bank of America Merrill Lynch, BNP Paribas, Commerzbank, Credit Agricole, Credit Suisse, Gazprombank, Helaba, ING, Intesa Sanpaolo, Natixis, Nordea, NordLB, Raiffeisen Bank International, Royal Bank of Scotland, Sberbank, Societe Generale, Standard Bank, Sumitomo Mitsui Banking Corp and UniCredit. However, the borrower had difficulty meeting its loan repayment obligations. United Company RUSAL Plc ‘shocked lenders when it approached [them] for a covenant holiday within six months of the [September 2011 PxF facility agreement] being signed. The lenders agreed not to test the covenants in the September 2011 PxF facility agreement throughout calendar year 2013, a move that they called ‘pragmatic’ at the time. United Company RUSAL Plc was battered between early 2012 and early 2014 by aluminium prices plummeting due to global oversupply and reduced Chinese demand. By March 2014, the borrower was teetering on the edge of default and approximately 70% of bank participants in the September 2011 PxF facility agreement agreed in principle to the terms of a debt restructuring agreement. However, CDB was reportedly one of several banks that had not agreed in principle to the proposed debt restructuring terms. During the same month (March 2014), Russia's finance minister, Anton Siluanov, said that his government was considering creating a special fund, backed by VEB (a Russian state-owned bank), to support industry as it did in 2008-09, although he warned that the government would not bail out the country's oligarchs. ‘We should help companies, not owners,’ he told a business forum at the time. Then, in April 2014, United Company RUSAL Plc and its lenders under the September 2011 PxF facility agreement signed a forbearance agreement, which stated that from April 8, 32014 until at least July 7, 2014, lenders would not seek any action against any companies in the Rusal group for failing to make debt repayments or breaching covenants. Meanwhile, United Company RUSAL Plc would seek to win unanimous approval from creditors to restructure its existing pre-export finance (PXF) facilities. On August 18, 2014, the borrower signed a $5.2 billion amendment and restatement of two pre-export finance facility agreements: the $4.75 billion PxF facility agreement from September 2011 and a $400 million multicurrency credit (PxF) facility with Sberbank. Under the terms of the amended and restated agreement, United Company RUSAL Plc effectively combined the two PXF facilities into a single facility agreement and postponed scheduled repayments of principal until January 2016. Pursuant to the amended and restated agreement, the new (combined) facility consisted of (1) a $2.56 billion tranche (‘Tranche A’) that was to be repaid in equal quarterly instalments starting from January 12, 2016 with a final maturity date in December 2018. Loans under Tranche A bore interest at the rate of 3-month LIBOR plus a margin (cash + PIK) based on Total Net Debt/EBIDTA ratio which is revised quarterly. Interest was to be paid quarterly. (2) A second tranche consisted of the refinanced Tranche B under the 2011 PXF facility agreement amounting to $1 billion, which was to be repaid in quarterly instalments commencing from January 20, 2017 with a final maturity date in December 2020. The first eight instalments were to be in the amount of $31.25 million and the remaining eight instalments were to be in the amount of $93.75 million. Loans under this second tranche were to bear interest at a rate of 3-month LIBOR plus 5.65% per annum plus a PIK Margin determined in line with Tranche A and such amounts were to be paid quarterly. During calendar year 2014, the borrower made a scheduled repayment of principal under the $4.75 billion syndicated PxF facility in the amount of $203 million. Additional principal repayments under the $4.75 billion syndicated PxF facility were made as prepayments.
Staff comments
1. The exact monetary value of CDB’s contribution to the syndicated loan (PxF) is unknown. For the time being, AidData assumes equal contributions to the $1 billion tranche ($50 million) across the twenty known members of the syndicate. This issue warrants further investigation. 2. United Company RUSAL, international public joint-stock company (Russian: МКПАО «ОК РУСАЛ», romanized: MKPAO «ОК RUSAL») is the world's second largest aluminium company by primary production output (as of 2016). It was the largest until overtaken by China Hongqiao Group (a Chinese private aluminium company) in 2015. UC RUSAL accounts for almost 9% of the world's primary aluminium output and 9% of the world's alumina production. The United Company was formed by the merger of RUSAL (Russkiy alyuminiy, lit. Russian aluminium) (Russian: Русский алюминий), SUAL, and the alumina assets of Glencore, completed in March 2007. According to its own statistics, UC Rusal accounts for 6.2% of the world's primary aluminium output and 6.5% of the world's alumina production, while operating assets in 13 countries over five continents, employing over 61,000 people across its international operations and offices. The company is incorporated in Jersey, where it has its financial center, but its headquarters are in Moscow, Russian Federation. UC Rusal is a public limited company and its shares are traded on the Moscow Stock Exchange, Hong Kong Stock Exchange and European Stock Exchange. Since September 25, 2020, the company changed its place of registration from Jersey to Kaliningrad, Russia. 3. A pre-export finance (PXF) facility is an arrangement in which a commodity producer gets up-front cash from a customer in return for a promise to repay the customer with that commodity (possibly at a discount) in the future. PXF funds may be advanced by a lender or syndicate of lenders to a commodity producer to assist the company in meeting either its working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or its capital investment needs (for example, investment in plant and machinery and other elements of infrastructure). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited. There are two key documents in prepayment finance transactions: a contract providing for the advance payment by the offtaker to the producer for the purchase of goods/commodities (the 'Prepayment Contract'), and a loan agreement between a lender and the offtaker (the 'Offtaker Loan Agreement') under which the advance payment is financed. 4. ING Bank N.V. served as Facility Agent, BNP Paribas (Suisse) SA and ING Bank N.V. served as Security Agents, and Natixis served as Offtake Agent on the August 18, 2014 amended and restated agreement. 5. As of September 2013, the principal amount outstanding under the September 2011 loan (PxF facility) agreement (including Tranche A and Tranche B) was $3.44 billion. 6. AidData has estimated the all-in interest rate that applied to the $1 billion tranche by adding 3.85% to average 3-month LIBOR in September 2011 (0.35023%).