Reuters reported that persistently tight international credit markets are forcing leading Russian steel producers to explore options such as rouble bonds and equity issuance in order to raise funds previously obtained through syndicated loans.
Ms Christine Coignard MD of Hatch Corporate Finance said the European sovereign crisis had dashed any hope for more financing options. She said “We don't see that changing for at least one year.”
Easy access to syndicated loans from international lenders was the norm for Russian steel until 2008, when the financial crisis drained liquidity from the market and leading producers scrambled to refinance short term debt.
Bankers said since then, Russian state loans, rouble bonds, equity issues and convertible bonds have filled the gap, adding that overall borrowing has dropped sharply.
Several companies, such as pipe maker TMK and infrastructure specialist Evraz are severely restricted from borrowing additional funds as a result of agreements reached with international lenders when they altered covenants on existing loans.
As a result, expensive M&A activity and Greenfield projects have largely been put on hold, though less indebted producer Magnitogorsk Iron & Steel Works was able to borrow USD 450 million in project financing from Turkish banks for its MMK Atakas steel project in that country.
Pipe maker OMK also obtained in January a EUR 347 million loan from a syndicate of largely German banks to purchase equipment from Dusseldorf-based SMS Demag.
Such news and recent announcements from more liquid oil sector players such as Lukoil that they could issue Eurobonds after this summer provide room for optimism.