Russia
Published: 30 May 2010
A signature loan
HSBC Russia helps to find funds for local corporates in a tight market
HSBC Russia achieved a significant victory in January this year when it signed an agreement with Vnesheconombank (VEB) on raising a syndicated loan worth USD700 million and EUR100 million.
The tenor of the loan is three years with a loan rate set at a six-month interval by the London Interbank Offered Rate and Euro Interbank Offered Rate plus 2.75 per cent per year.
VEB is the latest in a series of incarnations of this official financial institution that originated in 1922 as the 'Russian Commercial Bank'. After several changes of name and scope, it is now a state corporation officially called 'The Bank for Development and Foreign Economic Affairs'. VEB acts as a government vehicle for foreign investments in the Russian economy VEB raises credit and funds for financing current investment projects.
The arrangement and the raising of the loan by VEB is a symbolic event for Russia's banking system as a whole. The loan rate established new price-borrowing targets for Russian banks at a time when comparable targets were hard to find.
Mr Peter Hughan, Head of Global Banking, HSBC Russia, said, "This is a very significant loan because of its timing, funding strategic corporates in the Russian market."
VEB was the first Russian bank to decide to raise a three-year syndicated loan in 2010 against the backdrop of post-world-financial crisis developments.
Among other participants in the transaction were The Bank of Tokyo-Mitsubishi UFJ Limited, Barclays Capital, BNP Paribas, Calyon, Citigroup, Deutsche Bank AG, Intesa Sanpaolo Bank Ireland plc, Societe Generale Corporate & Investment Banking, Sumitomo Mitsui Corporation Europe Limited, UBS AG, UniCredit Group and West LB AG.
The deal was executed to an extremely tight timetable to take advantage of positive market momentum. The success of this transaction showed HSBC as the top debt capital market house for emerging markets issuance in 2009.
Banking on strength
Bond issue shows HSBC's Russian skills
When Promsvyazbank (PSB), one of Russia's leading privately owned commercial banks, sought to enlarge its capital base through a eurobond issue last year, HSBC Group's team in Russia stepped in to help PSB increase its resilience in case of shocks to the banking system.
PSB was set up in 1995, and as at 1 January 2010, it ranked 10th by assets among Russian banks. In November 2009 HSBC acted as Joint Lead Manager and Joint Bookrunner on a 12.75 per cent, 5.5-year USD200 million LTII subordinated issue for PSB. The transaction was announced with a price guidance of around 13 per cent for a US dollar benchmark. The strength and quality of demand enabled the borrower to price the transaction 25 basis points inside the initial guidance at 12.75 per cent.
HSBC's strategy of engaging the Russian domestic investor base from the beginning of the marketing phase proved fruitful as this demand provided the necessary impetus in the book, with the eventual size and price exceeding pre-launch expectations.
Peter Hughan, Head of Global Banking, HSBC Russia, said, "HSBC managed to build a book in a very challenging environment."
It was the first subordinated Lower Tier 2 transaction out of the Central and East European banking sector since the beginning of 2008 and the first new issuance from the Commonwealth of Independent States privately owned banking sector since June 2008 (the last one being for PSB, which was also brought to the market by HSBC).
This was also one of the lowest-rated transactions to be placed in the markets since the beginning of the world financial crisis, with ratings of Ba3-, CCC+ and B- from agencies Moody's Investors Service, Standard and Poor's and Fitch Ratings respectively.
From a structuring perspective, HSBC showed flexibility in working with the client and investors to structure a transaction as a non-callable bullet 5.5-year deal.
The deal was executed to an extremely tight timetable to take advantage of positive market momentum. The success of this transaction showed HSBC as the top debt capital market house for emerging markets issuance in 2009.
Alexander Morozov
Alexander Morozov joined HSBC in 2005 and has more than 20 years' experience working on post-Soviet economies in the academic and financial sectors, with a solid track record of successful macroeconomic, political and FX analyses and rate calls in relation to Russia, Kazakhstan and Ukraine. He holds a Diploma in Economics from the London School of Economics and a PhD in economics from the Russian Academy of Sciences.
Full reports are available at the Global Research website where you can log on using your e-mail address and password. You will find the report using the filter by author. If you are a first-time user, please contact your HSBC relationship manager to arrange access to the site.
Peter Hughan
Peter Hughan has 24 years of experience in HSBC, of which the last 13 have been in corporate banking. He has worked extensively in Asia, the Middle East, and North America covering a broad range of corporate customer groups and conglomerates in a variety of industries and sectors. He is currently head of the relationship coverage teams in Global Banking in Moscow, where he has worked since 2006.
HSBC Russia on signature loan
HSBC Russia has signed a syndicated loan agreement with Vnesheconombank to raise capital funds for local corporates in the market.
Banking on strength
HSBC aids Russian commercial bank PSB to enlarge capital base through bond issue in a challenging environment.
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