Russia's UC RUSAL has surprised its lenders with a request for a covenant holiday on a $4.75 billion pre-export syndicated loan just nine weeks after the deal signed, banking sources close to the deal said.
The world's biggest aluminium producer has asked for the break in an attempt to generate more headroom to avoid potentially breaking covenants, after failing to include an investment project in the original forecast, though the volatile euro zone outlook is also a consideration, the bankers added.
"Syndicated banks are still considering RUSAL's request, as it is not an easy ride, but I think there are good reasons behind it," one European banker said.
The dual-tranche loan was secured with BNP Paribas, Credit Agricole CIB, Commerzbank, ING Bank, Gazprombank, Natixis, Nordea Bank, Royal Bank of Scotland, Sberbank, Societe Generale, SMBC, UniCredit Bank and WestLB on September 29. BNP Paribas and ING were joint coordinators.
RUSAL's request is considered deal-specific and not a reflection of the wider market. However, bankers agree that calls for more waivers going forward are a possibility because of the depressed euro zone economy.
"Obviously a tougher economic environment stretches credits and puts them under more pressure," a second European banker said.
Proceeds of the five-year loan were used primarily to refinance debt under the International Override Agreement (IOA) that backed RUSAL's restructuring in December 2009 and also to repay outstanding liabilities to shareholder Onexim. Any remaining balance from the financing was to be used to partially repay RUSAL's Russian facilities.
RUSAL did not immediately respond to phone calls or emails seeking comment.
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