Exclusive: New Russia sanctions disrupt
major Intesa loan syndication
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[August 25, 2017]
By Sandrine Bradley, Stephen Jewkes and Dmitry Zhdannikov
LONDON/MILAN (Reuters) - Italian bank
Intesa Sanpaolo has encountered problems syndicating a loan to Glencore
and Qatar's wealth fund to finance their purchase of a stake in the
Kremlin-controlled oil major Rosneft because of new U.S. sanctions
against Russia.
Four banking sources told Reuters that Western banks including from the
United States and France have so far put on hold their participation in
the syndication of the 5.2 billion euro ($6.13 billion) loan that Intesa
provided last year.
Intesa invited about 15 banks to join the loan when it opened the
syndication in May. A loan of this size would normally take between four
and six weeks to syndicate, though deals involving emerging markets can
sometimes take a few weeks longer.
The banking sources said their compliance departments needed to
understand the new sanctions.
They also said the syndication was complicated by a political stand-off
between Qatar and Saudi Arabia. Banks are taking a more cautious
approach to deals involving Qatar as they are wary of damaging their
relations with Saudi Arabia and the other three Gulf nations embroiled
in the dispute.
"The syndication is stuck because of new U.S. sanctions on Russia. The
new sanctions are so wide-reaching that they will surely impact all
similar deals involving Russian state firms," said a London-based source
with a large Western bank invited by Intesa to participate in the
syndication.
Intesa, Italy's largest retail bank, declined to comment. The banking
sources did not want themselves or their banks to be named because they
were not cleared to speak about the deal and because talks between
Intesa and the banks about the syndication are confidential.
Last month, Washington imposed new sanctions on Russia in the strongest
action against Moscow since 2014 following Russia's annexation of Crimea
and incursion in east Ukraine.
The new round of sanctions was in part a response to conclusions by U.S.
intelligence agencies that Russia meddled in the 2016 U.S. presidential
election. The sanctions dashed hopes of a rapprochement between Moscow
and Washington.
The syndication was meant to spread the risk for Intesa which has so far
lent all of the money. The loan helped commodities house Glencore and
the Qatar Investment Authority buy 19.5 percent in Rosneft to help the
Russian government plug budget holes.
The Italian government says the loan is compliant with the new
sanctions.
COMPLICATED
Intesa, which ranks as a fairly small investment banking player but has
good connections in Russia, invited several French, Dutch and U.S. banks
as well as China's Bank of China and ICBC to participate in the deal.
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The Intesa Sanpaolo logo is seen in Milan, Italy, in this January
18, 2016 file photo. To match Insight ITALY-BANKS/FUND
REUTERS/Stefano Rellandini
A source said ICBC and Bank of China had indicated they would be
willing to participate in the deal, though they are more wary now
given the political problems hitting Qatar. An official at ICBC
declined to comment and one at BOC did not immediately respond to a
request for comment.
Bankers said the syndication was always expected to be complicated.
Rosneft, its boss Igor Sechin and Russia’s top state banks are all
subject to sanctions imposed after Russia’s annexation of Crimea
from Ukraine in 2014, and some banks had refused to consider the
deal on these grounds from the start.
In addition to that, Glencore and QIA never disclosed full details
of the deal, prompting the bankers to question whether they could go
ahead with the syndication without knowing all beneficiaries of the
transaction.
A spike in tensions between Qatar and its Gulf neighbors including
Saudi Arabia also happened just as Intesa started syndicating the
loan.
"The regional dispute has not helped – it is tough," a London-based
loan banker said.
"Political tensions around Qatar slowed the deal somewhat. But a
real problem came when the U.S. imposed new sanctions (on Russia) in
July," another London-based banking source said.
Back in 2014, U.S. and European sanctions made it impossible for
Russian state-owned companies and many private ones to raise new
capital but left loopholes for raising money.
"With the new sanctions, I expect a lot of troubles with lending to
projects led by Russian state firms... And possibly to many private
ones," said one of the banking sources.
($1 = 0.8477 euros)
(Additional reporting by Tessa Walsh and Shu Zhang; Writing by
Dmitry Zhdannikov; editing by Anna Willard)
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