July 24, 2017 / 12:31 PM / 3 years ago

LPC-Ukraine’s Ferrexpo raising US$350m pre-export loan

LONDON, July 24 (Reuters) - Ukrainian iron ore producer Ferrexpo is raising a four-year pre-export syndicated loan of up to US$350m, banking sources said on Monday.

The deal is the first time the company has tapped the syndicated loan market since discharging financial restructuring advisers in April 2016.

Ferrexpo returned to a more stable financial footing last summer after an increase in commodity prices and easing hostilities with Russia.

The loan is being arranged by BNP Paribas, which is acting as co-ordinating mandated lead arranger. The deal has been launched to a wider syndication and will close on July 31.

It includes a provision for an accordion feature to increase the deal to up to US$500m depending on bank appetite for the facility.

However the new financing comes against a backdrop of increased tension between Russia and Ukraine in recent weeks. Russian-backed rebels in the Eastern part of Ukraine announced the creation of a new state called Malorossiya, or ‘Little Russia’ earlier this month.

Ferrexpo declined to comment.

There have been almost no Ukranian loans since Russia annexed the Crimea in March 2014, with the exception of loans for agribusiness Kernel, which last borrowed US$300m in a pre-export financing in 2016.

“Kernel is the only Ukrainian company that has recently tapped the international syndicated loan market - it will be interesting to see what appetite is like,” the banker said.

Ferrexpo appointed PTJ Partners to negotiate with creditors at the end of 2015, and PwC was mandated by two separate groups of pre-export finance lenders to come up with a restructuring plan.

At that time, the company had two outstanding amortising pre-export loans – including a US$420m 2011 facility that was due to mature in July 2016 that was repaid and a US$350m 2013 facility that matures in August 2018 that remains outstanding.

Ferrexpo made the final scheduled repayment on the US$420m facility in August 2016. That pre-export financing was originally agreed in 2011 with a syndicate of banks comprising ING Bank, UniCredit Bank, Societe Generale, ABN Amro, Citigroup, Credit Suisse, ICBC, WestLB and JP Morgan and paid 225bp over Libor.

Moody’s Investors Service upgraded Ferrexpo’s rating to Caa2 in April, citing the company’s improved liquidity profile and the expectation of strong cash flow generation in 2017/18, which will help the company to manage its near-term debt maturities.

Ferrexpo, headquartered in Switzerland and incorporated in the UK, is a mid-sized iron ore pellet producer with mining and processing assets located in Ukraine. (Editing by Tessa Walsh)

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