Bank of China contributes to $1.085 billion syndicated pre-export finance facility to help Rusal refinance its outstanding debts

On October 29, 2019, United Company Rusal (‘Rusal’ or ‘UC Rusal plc’) signed a $1,085,000,000 syndicated pre-export finance (PXF) facility (loan) agreement with a syndicate of 11 banks, including ING Bank, Natixis, Bank of China, Crédit Agricole Corporate & Investment Bank, Societe Generale, UniCredit S.p.A., Sberbank, RCB Bank LTD, Intesa Sanpaolo Bank Ireland Plc, Bank ZENIT (Public Joint Stock Company), and Raiffeisen Bank International AG. ING and Natixis were coordinating bookrunners, coordinators and mandated lead arrangers. Bank of China, Crédit Agricole, Société Générale and UniCredit were initial bookrunning mandated lead arrangers. Sberbank was bookrunning mandated lead arranger. RCB Bank was initial mandated lead arranger. Intesa Sanpaolo and Bank Zenit were mandated lead arrangers. Raiffeisen Bank was lead arranger. Natixis and SocGen were sustainability coordinators on the deal. The loan carries a 5-year maturity and an interest rate of 6-month LIBOR plus a 2.25% margin. The loan’s interest rate is subject to a 12.5 basis point discount or premium that depends on Rusal’s fulfillment of sustainability-linked KPIs. The loan is guaranteed by PJSC "RUSAL Bratsk"; JSC "RUSAL Krasnoyarsk"; JSC "RUSAL Novokuznetsk"; JSC "RUSAL Sayanogorsk"; JSC "RUSAL Ural"; RS International GmbH; RTI Limited; RUSAL Marketing GmbH; JSC "RUSSIAN ALUMINIUM"; JSC "UC RUSAL - Trading House" (each being a wholly-owned subsidiary of Rusal). The loan is also collateralized against an ‘assignment of certain contracts’ and a ‘charge or pledge of accounts’. The loan proceeds are to be used by the borrower to partly refinance the principal outstanding under a $2 billion pre-export finance facility that was drawn in May 2017.

Additional details

1. The size of Bank of China’s contribution to the loan syndicate is unknown. For the time being, AidData assume equal contributions ($98,636,363.63) to the loan syndicate across the 11 participating banks. 2. The all-in interest rate (4.207%) was calculated by adding the 6-month LIBOR rate in October 2019 (1.957%) to 2.25%. 3. This transaction combines a pre-export finance structure with a sustainability-linked feature, and includes KPIs related to carbon footprint and fluoride emission reductions as well as sales of Rusal’s “green” aluminium brand, Allow. It is the first ever sustainability linked internationally syndicated loan signed by a Russian borrower. Market participants say that the green financing trend is developing momentum in Russia, which some say is motivated by the desire to attract international investors and lenders to Russia. According to market participants, more Russian borrowers and issuers have been discussing raising green debt with their relationship lenders and with ESG ratings agencies. 4. Cleary Gottlieb Steen & Hamilton and Clifford Chance were the law firms that advised the parties to the transaction. 5. This loan was Rusal's first entry into loan capital markets after it was sanctioned and in 2018 and subsequently de-listed in January 2019. In April 2018, the US Treasury placed sanctions on Rusal, EuroSibEnergo and holding company EN+, because of their links to sanctioned oligarch Oleg Deripaska. In January 2019, the US lifted the sanctions on the companies, after Deripaska's decision to transfer much of his holdings in the companies to VTB, reducing his to less than 50%. 6. A pre-export finance (PXF) facility an arrangement in which a commodity (e.g. oil) 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. Due to to various international sanctions imposed upon Russia, PXF facilities are one of the fews ways in which commodity producers (borrowers) can borrow in foreign currency. 7. As of 2016, UC Rusal's biggest shareholders were En+ Group with a controlling stake of 48.13%, along with Onexim Group (13.7%) and SUAL (15,80%). 8.75% is owned by Amokenga Holdings, Toni Shterev owns 00.1% of the shares Rusal, a wholly owned subsidiary of Glencore.

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