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EBRD’s role

EBRD’s role in the syndicated loan markets of Russia & CIS IC│Energy Corporate Financing in Russia & CIS London 24 th -25 th November 2011. EBRD’s role. Longer-term capital mobilisation Keeping credit flowing to the financial sector Helping corporate balance sheet restructuring

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EBRD’s role

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  1. EBRD’s role in the syndicatedloan markets of Russia & CIS IC│EnergyCorporate Financing in Russia & CISLondon24th-25th November 2011

  2. EBRD’s role • Longer-term capital mobilisation • Keeping credit flowing to the financial sector • Helping corporate balance sheet restructuring • Promoting innovation in infrastructure finance

  3. The fallout from the Eurozone crisis • “Eastern Europe has most to fear from banks’ retreat” • Financial Times 15th November 2011 • In CIS, Russia has least to fear • Pressure from head office and home regulators to repatriate or retain capital at the centre • Open statements from Unicredit and Commerzbank • Others? • If traditional large suppliers of credit retrench, economic disruption seems inevitable

  4. Infrastructure lending outlook • Basel III makes infrastructure assets unattractive • InfraNews, 3rd November 2011 • Some key quotes: • “For most banks it’s not a prudent use of their capital to sit on these assets for 20 or 30 years. It’s not what they raise equity for.” • “They didn’t raise capital to [book] a 29 year loan for a toll road [but] to get the hedge, the cash management and the upfront fees.” • Bob Dewing, Columbia University Business School (and 26 years Citigroup)

  5. EBRD: some key figures • Owned by 61 countries + two intergovernmental institutions • AAA/Aaa rated, EUR 30 bn capital base • Emphasis on private sector development and entrepreneurship • Private sector approx 80% of portfolio • Mobilises significant foreign direct investment • Promotes infrastructure development • Promotes environmentally sound and sustainable development • EBRD operates in 29 countries via 35 offices • Invested EUR 64 bn in > 3,100 projects since 1991* • Portfolio: 83% debt, 17% equity * To end-March

  6. 2010 volume by region

  7. 2010 volume by sector

  8. Promoting local currency debt markets EBRD local currency loan portfolio: EUR 5.1 bn equivalent* RUB 51% of LCY portfolio *EBRD’s local currency loan portfolio (“A” loans): EUR 3.9 bn as at end January 2011

  9. Russia – top ten syndicated loan providers 2010(and EBRD Russia volume 2010) Of which > 90% at 5 yrs or longer USD bn

  10. Russian borrowers by %, 2010-2011:concentrated at the top of the credit curve > 50% captured by 9 names and 3 sectors

  11. EBRD’s value added • Debut borrowers and borrowers down the credit curve • Borrowers requiring longer tenors (including the big names) • Groundbreaking transactions – PPPs, projects requiring long lead times and investment in policy dialogue; promoting an enabling environment • Specialised teams across numerous sectors: • Financial Institutions - Industrial • Power - Municipal • Natural Resources - Telecoms • Real Estate • Long-term local currency lending – RUB/KZT

  12. EBRD’s syndication successes • PPPs and infrastructure • Manufacturing and industry • Balance sheet restructuring • Environmental investments • Financial institutions

  13. Infrastructure - transport PULKOVO AIRPORT (Russia) EUR 200 mm for the reconstruction and expansion of St. Petersburg’s Pulkovo Airport managed by Northern Gateway (“Concessionaire”), a company indirectly set up and currently owned by VTB Group, Fraport and Copelouzos Group This is Russia’s first PPP in the airport sector The loan is part of a long-term debt package of about EUR 716 mm put together by 5 IFIs and Russia’s Vnesheconombank EBRD A Loan EUR 100 mm; 15 years EBRD B Loan EUR 100 mm; 12 years Signed July 2010 13

  14. Infrastructure - power Paravani Power Plant (Georgia) USD 63.5 mm 15-year senior loan to Georgian-Urban Enerji Ltd for the construction, financing, operation, maintenance and management of the Paravani hydro power plant and the transmission lines (allowing connection to the Georgian grid and export to Turkey) EBRD A Loan USD 52 mm; 15 years EBRD B Loan USD 11.5 mm; 15 years USD 52 mm Parallel Loan from IFC Signed August 2011 14

  15. Infrastructure - power EDPR Cernavoda & Pestera wind farms (Romania) EUR 188 mm EBRD and IFC joint project financing for the construction, commissioning and operation of two adjacent wind farms: Pestera (90 MW) and Cernavoda (138 MW), both located in SE Romania EBRD A Loan EUR 69 mm; 14.5 years EBRD B Loan EUR 25 mm; 14.5 years EUR 94 mm Parallel Loan from IFC Signed July 2011 15

  16. Infrastructure - power HIDROELECTRICA S.A. (Romania) EUR 110 mm senior loan to finance the rehabilitation of six units at Stejarul Bicaz, a 50-year old hydro power plant with a total capacity of 210 MW on the Bistrita River in the north-eastern Romania Hidroelectrica has a market share of 35% in Romania, with a network of 273 power plants and pumping stations with a total capacity of 6,482 MW EBRD A Loan EUR 69 mm; 14.5 years EBRD B Loan EUR 25 mm; 14.5 years Signed July 2011 16

  17. Infrastructure - power Kazakhstan Electricity Grid Operating Company (Kazakhstan) USD 156 mm senior loan for refinancing purposes and for financing CAPEX associated with the rehabilitation of substations and high-voltage equipment The first syndicated loan for a Kazakh borrower since the global financial crisis (October 2008) EBRD A Loan USD 86 mm; 15 years EBRD B Loan USD 70 mm; 12 & 15 years Signed May 2011 17

  18. Infrastructure - power Termoelektrarna Šoštanj d.o.o. (TEŠ) (Slovenia) EUR 200 mm to finance a EUR 1.2 billion investment plan to replace four ageing power generation units with a new 600 MW unit utilising supercritical technologies TEŠ is the largest power generation plant in Slovenia with an installed capacity of 779 MW, generates, on average, one third of the energy in Slovenia. EBRD A1 Loan EUR 80 mm; 15 years EBRD A2 Loan EUR 20 mm; 12 years EBRD B1 Loan EUR 80 mm; 15 years EBRD B2 Loan EUR 20 mm; 12 years Signed January 2011 18

  19. Infrastructure - power SEDAS (Turkey) USD 175 mm to SEDAS as part of a larger USD 325 mm facility that is being co-financed with an IFC USD 150 mm A/B loan, to be utilised to enable SEDAS to make considerable efficiency and environmental improvements in its distribution network SEDAS is the first electricity distribution company to be privatized in Turkey EBRD A Loan USD 100 mm; 12 years EBRD B Loan USD 75 mm; 12 years USD 150 mm IFC Parallel Loan Signed December 2010 19

  20. Transport BRUNSWICK RAIL (Russia) USD 200 mm to finance the purchase of over 5,000 new railcars, primarily gondolas, to help meet growing demand as the Russian rail freight market recovers from the downturn it suffered in 2008-2009 IFC in parallel negotiations to raise an additional USD 100 mm for the same project in conjunction with this loan EBRD A Loan USD 100 mm; 8 years EBRD B Loan USD 100 mm; 5 years Signed July 2010 20

  21. Transport InterLeaseInvest LLC (Ukraine) Borrower: a fast growing privately owned provider of rail cargo transportation and railcar operating leases to corporate clients in Ukraine Project: USD 90 mm to finance rail stock financing The first EBRD syndicated loan transaction to a privately owned provider of rail transportation services in Ukraine EBRD A Loan USD 45 mm; 7 years EBRD B Loan USD 45 mm; 5 years B Loan 1.5 times oversubscribed Signed September 2011 21

  22. Natural Resources Kubgas (Ukraine) USD 40 mm 7-year senior loan for the development of on-shore gas and condensate fields in the Lugansk region, eastern Ukraine, in the period of 2013 One of very few transactions in Ukraine with a long term tenor for an independent natural resources sector company EBRD A Loan USD 25 mm; 7 years EBRD B Loan USD 15 mm; 7 years Signed May 2011 22

  23. Agribusiness MK Group and Sunoko (Serbia) EUR 80 mm capex, working capital financing and balance sheet restructuring senior secured loan The first international syndication with EBRD’s involvement in Serbia after the global financial crisis in the agricultural sector EBRD A Loan EUR 40 mm; 5 & 7 years EBRD B Loan EUR 40 mm; 5 years Signed August 2011 23

  24. Heavy industry debt restructuring ALRO S.A. (Romania) USD 180 mm for Alro, the largest primary aluminium producer in Central and Eastern Europe, for refinancing purposes Alro is 88% directly and indirectly owned by Vimetco N.V. and 10% by Fondul Proprietatea S.A. (a Romanian state-owned investment vehicle), with the remaining 2% of shares in free float EBRD A Loan USD 75 mm; 5 year Term Loan and 3 year Revolver EBRD B Loan USD 105 mm; 5 year Term Loan and 3 year Revolver Signed August 2010 24

  25. Financial institutions PROMSVYAZBANK (Russia) USD 250 mm to club deal, which was the first syndicated loan transaction for a private Russian bank in 2010 EBRD A Loan USD 100 mm; 3 years EBRD B Loan USD 150 mm; 1 year The B Loan was oversubscribed and closed at senior level as a club with the participation of 11 commercial banks Signed June 2010 25

  26. Financial institutions TransCapitalBank (Russia) USD 13 mm senior loan for on-lending to local small and medium-sized enterprises The first time an institution with a specific mandate to act as a socially responsible lender participates as co-financier to raise funds for a Russian borrower EBRD A Loan USD 10 mm; 4.5 years EBRD B Loan USD 3 mm; 3 years Signed August 2011 26

  27. Financial institutions Credit Europe Bank (Russia) USD 250 mm EBRD and IFC joint senior syndicated loan facility for trade finance, corporate, SME and retail financing One of very limited number of syndicated loans completed for a private mid-sized Russian bank since the global financial crisis (October 2008) Syndication oversubscribed, raising double the sum originally intended from a wide range of investors (16 commercial banks) EBRD A Loan USD 50 mm; 3 years EBRD B Loan USD 75 mm; 1 year, with extension option for another year Signed August 2011 27

  28. Financial institutions Raiffeisen Bank S.A. (Romania) EUR 150 mm senior loan for trade finance, corporate, SME and retail financing The first syndicated loan transaction in the financial sector in Romania since the global financial crisis (October 2008), aimed at re-opening access to debt capital markets for Romanian commercial banks EBRD A Loan EUR 40 mm; 5 years EBRD B Loan EUR 110 mm; 2 years Signed September 2011 28

  29. Financial institutions Bank Eskhata (Tajikistan) USD 8 mm senior loan for on-lending to local micro and small enterprises The first syndicated loan transaction in Tajikistan since 2008 and a first time a German cooperative bank committed to socially responsible lending has invested in Tajikistan alongside EBRD as a B lender EBRD A Loan USD 2 mm; 4 years EBRD B Loan USD 6 mm; 4 years Signed September 2011 29

  30. Basel III: capital required as % of RWAsBuild-up of common equity and buffers over time • Improvement in quality of capital • Risk weighting of assets to be refined • “Big bank” surcharge tba Implementation begins 1 January 2013 and member countries must transfer B3 into law by that time Treatment starts 1 January 2018

  31. Banking sector capital and liquidity shortfalls*vs Basel III 2019 requirement (EUR billion) * McKinsey estimates

  32. Outlook • Basel III will dominate and shape banks’ lending appetites • Gradual but uneven recovery of loan markets • Strong names can choose from several pools of capital • Division between high- and low-quality credits will persist • Simpler loan structures will prevail into 2012

  33. Thank you for your attention!Lorenz JorgensenDirector, Head of Loan SyndicationsTel: +44 20 7338 6902Email: jorgensl@ebrd.com All loan market data sourced from Dealogic LoanAnalytics or LoanRadar

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