Norilsk Nickel seeks bank loans for $3.5-billion share buyback

Russian metals group Norilsk Nickel is in talks with banks for a loan of up to $3.5 billion to buy back shares, potentially marking its first international syndicated loan since 2008. The company’s board approved a buyback of 7.7 per cent of its shares at $306, a total of $4.5 billion. Negotiations are going on with six banks that are part of Norilsk’s primary lending group, which largely consists of European banks, a European banker has said.

Norilsk is approaching the international loan market at a time when European lenders are facing increasingly limited liquidity amid intensifying dollar funding concerns, which has resulted in a rising pricing trend. “The arsenal of the company has sufficient instruments to efficiently attract financing for the implementation of strategic aims without using convertible bonds,” Dmitry Kostoyev, Norilsk deputy CEO for economy and finance has said in a statement.

In 2008, Norilsk signed a $1.5-billion, three-year syndicated loan that was arranged and underwritten by Bank of Tokyo- Mitsubishi UFJ, Bayerische Hypo- und Vereinsbank, Calyon, ING, RBS, Societe Generale, Sumitomo Mitsui Finance Dublin, Unicredit HVB and WestLB. Norilsk is rated AA+ by Standard and Poor’s and Baa2 by Moody’s.

Anti-trust body questions Norilsk’s plans

Russia’s anti-trust body has written to Norilsk Nickel questioning aspects of its planned share buyback, a development that analysts said may delay the metals group’s $4.5-billion share purchase. Norilsk said it was proceeding with the buyback and was preparing a response to the Federal Anti-Monopoly Service (FAS).

“The FAS letter confirms that the buyback is only possible with the permission of the government commission (on foreign investments, headed by Prime Minister Vladimir Putin),” Norilsk shareholder UC RUSAL said in an e-mailed statement. “Without the permission, all Norilsk deals within the buyback are null and void.” In a separate press release, Norilsk Nickel said it is not breaking the investment law.

The buyback offer came after the board of the world’s gest aluminium producer, RUSAL, rejected an offer for its Norilsk shares, also at $306 each. Norilsk has been pushing for a buyback to resolve a long-standing dispute between rival oligarchs Vladimir Potanin, whose Interros investment company holds about 30 percent of Norilsk, and Oleg Deripaska, who controls RUSAL. “The most likely outcome is that the commission will grant approval, but the process may delay the buyback,” Alfa Bank said in a note.