Page 112 - IFR Opportunities in Russian capital markets

CHAPTER SYNDICATED LOANS 06 Background
This business is booming and volumes have been doubling every year for the last four with no sign of a slowdown. The funds of external investors are playing an increasing role in their source base of Russian banks. From 1 January 2002 to 1 October 2006, the volume of interbank credit attracted from non-resident banks increased 12-fold, from US$3.3bn to US$39.5bn, according to VEB.
These volumes make Russia the biggest user of syndicated loans in the emerging market universe, borrowing twice as much as China, which was in second place in 2006.
Russia was already the biggest borrower on the syndicated credit market in 2004, raising a total of US$13.6bn according to the World Bank, ahead of Brazil in second place with US$9.8bn. However, Russian appetite for debt meant that it pulled ahead in 2005 when Russian companies borrowed US$40.1bn, or twice as much as Chinese companies (US$18.5bn) and significantly more than Mexican (US$18.2bn), Brazilian (US$13bn) and Indian corporations (US$12.2bn). However, the figures from 2005 are skewed by the two jumbo event-driven loans for Gazprom and Rosneft, which totalled US$13.1bn and US$7.6bn respectively.
The rate of borrowing has slowed in the last year, partly because other forms of financing are becoming available and partly because the Kremlin has become very aggressive in the rates it demands. The total volume of Russian syndicated loans barely changed from 2005 to 2006 and was down marginally to US$38.5bn from US$40.1bn in this period (see Figure 6.1).
Commodity sectors still dominated in 2006, although financial and telecoms sectors took a more important share of the market (see Figure 6.2). Relationships have also become more important as yields declined. Syndicates were more top-heavy as the proportion of retail investors and pure asset-taking participants declined.
Figure 6.1: Russian syndicated loans market, 2001–06 (US$bn)
US$bn
45 40 35 30 25 20 15 10
5 0
Acquisition related financing
Value
No of issues
30
2001 2002
2003 2004
2005 2006
62
74
111
133
48
Source: Citigroup
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