Russneft to pay 9% per annum to Sberbank and Glencore

Russneft has succeeded on the restructuring of its liabilities to Sberbank and Glencore. According to the new clauses, the liabilities to both creditors will be paid at a single interest rate of 9% per annum; the debt can be paid off until 2020, not until 2017 as before. These clauses will help the company to save $200 million a year and to invest the funds into production growth. The former interest rates were 12% for Sberbank and approximately 9% for Glencore. The total debt is $6.2 billion including $1.7 billion to Glencore and the rest to the Bank.
Russneft is the Russian eighth largest oil producer. In 2009 it extracted 12.7 million tons of oil and its oil refineries processed 7.6 million tons of oil. M. Gutseriyev and Systema AFC hold by 49% each in the company; Sberbank holds 2% as the majority creditor.
Mr. Gutseriyev, Russneft chief and founder borrowed $2 billion from Glencore in 2003 to found the company. The debt to Sberbank grew up during the period when it was under Mr. Deripaska’s control. Mr. Gutseriyev sold him Russneft in the end of 2006; a year ago the deal was cancelled and the company returned to Mr. Gutseriyev.
The clauses of the agreement between Russneft and its creditors were modified after long negotiations. At the end of September 2010 Mr. Gutseriyev reported that Russneft and the creditors had reached an agreement on the reduction of the interest rate from 12% to 8%. He told that Russneft would pay off its liabilities to Glencore gradually; it would pay off 3% a year to its trader and the rest 5% by installments within 10 years. He stated that Russneft would pay to its majority creditor Sberbank by 2017. However a source in the company tells that such a scenario is possible if oil price is high further and its tax burden reduces.
The debt restructuring gives the company an opportunity to return to ‘a normal credit history’.The lowering of the interest rate will help the company to save $200 million annually. The funds will be invested into thedevelopment of current and new projects. In future investment into oil production to 18 million tons by 2017. . Mr. Gutseriyev tells that Russneft can probably buy new assets in Russia and abroad.
V. Markov by Zerich Capital Management thinks that the new clauses will help Russneft to pay off the debt without any damage to operational activity. K. Yuminov by Rye Man & Gor Securities thinks that the saved funds will be spent into new assets purchase, most probably licenses for the deposits where the company operates already. In his opinion, if high oil price remains and Russneft actively rises production then the credit agreement will be revised under even more advantageous conditions.
Translated by Nadezhda Poltoratskaya
Source: http://www.kommersant.ru/doc.aspx?DocsID=1566152&NodesID=4