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  «Kommersant», Julia Garaeva  

High Pressure Guarantees // «Kazanorgsintez» will overcome the debt problem with government support

  OJSC «Kazanorgsintez» (KOS) closely approached the matter of RUB 1 bln. debt restructuring. Yesterday the government commission headed by Russian Senior Vice-Premier Igor Shuvalov approved granting of state guarantees to the total amount of RUB 17,5 bln to KOS and PSC “TAIF”, RUB 10 bln. out of this amount is the share of “Kazanorgsintez”. Experts think, now the enterprise may easier agree on debt refinancing with banks. At all that, the state support might require refusal of the tolling scheme that is of benefit for KOS, not on the most favorable conditions though.

Yesterday OJSC “Kazanorgsintez” and PSC “TAIF” received state guarantees to the total amount of RUB 17,5 bln. Russian Government press office reported that the state guaranties related to the Sberbank credit were approved by the Government Commission on Improvement of Sustainability of Russian Economy Development headed by the Senior Vice-Premier of the Russian Federation Igor Shuvalov. RUB 10 billion out of this amount is a share of “Kazanorgsintez” and RUB 7.5 billion – of “TAIF”. Yesterday, the General Director of “Kazanorgsintez” Leonid Alekhin and the head of “TAIF” Albert Shigabutdinov refused to comment having claimed that “they have no documents (on provision of state guarantees -„“) at their disposal yet”.

According to the accounting reports in compliance with IAS for 2008 a short-term financial indebtedness amounted RUB 27.9 billion and a long-term one – RUB 948 million. The USD 200 million liability on Eurobonds maturing in October 2011 in IAS accounting also was transferred to a short-term debt in connection with the breach of covenants. Besides, according to the General Director of TAIF Group Albert Shigabutdinov the creditors demanded that TAIF revises the conditions of the agreements entered into earlier. “We are offered to increase interest rates on the previously given credits from the present 6-7% to 18 – 24%,” – he said. New credits have not been given to KOS at all.

The debts of “Kazanorgsintez” have been accumulating sine 2005, when a large-scale modernization program was launched at the enterprise. In 2008 KOS accomplished implementation of its first stage that cost RUB 35 billion and announced the beginning of the second stage at the cost of RUB 70 billion. Instead, in 2008 “Kazanorgsintez” suffered RUB 2.8 billion of net loss because of increase in the cost of foreign currency loans by RUB 3 billion. In autumn of the last year due to worsening of the situation at the chemical market “Kazanorgsintez” found itself unable to serve its debt.

The major creditors of “Kazanorgsintez” are Sberbank, VTB and VEB. Sberbank and VTB offered to syndicate a loan for KOS in the amount of RUB 10 billion for five years subject to the company carries out an additional issue for their benefit t the amount of RUB 8 billion. This scheme did not suit TAIF which in such case would have lost control over its asset. Financial consultant of KOS Morgan Stanley offered another option – unification of all the credits into one maturing in 2016 and with payment deferred till the year 2010. For a long time the parties were not able to reach compromise. As a result, the President of Tatarstan Mintimer Shaimiev had to get involved into the settlement of this issue. In his letter to the Prime Minister of the RF Vladimir Putin dated June 8 the head of the republic asked for assistance in prolongation of KOS’s existing loans for eight years with a 2-year grace period. On July 10, in the course of his visit to Kazan Igor Shuvalov reported that Russian Government decided to provide “Kazanorgsintez” with guarantees to the amount of RUB 15 billion. Last week TAIF reported that Sberbank considered a possibility of provision of a credit facility to “Kazanorgsintez” to the amount of RUB 30 bln. This was confirmed by Tatarstan Prime Minister Rustam Minnikhanov who said that the issue of debt restructuring might be resolved “in the nearest future”.

According to experts, the provision of guarantees by the government suggests that the RUB 30 bln credit which has been discussed for a long time will be finally given. «Since September capitalization of KOS rose two times only due to the rumors about this credit facility”, IK “Solid” analyst Denis Borisov says, “I suppose the facility will be granted finally. The bank has no problems with liquidation at the moment and they have become more loyal towards restructuring issues. Should this favorable situation continue, KOS has good chances to successfully accomplish the negotiations.”

«Among the arguments for provision of state guarantees, there is a willingness of a bank to give a credit to the enterprise against such guarantees. Accordingly, we can say that KOS received a new credit facility or is restructuring the old one to the amount of RUB 20 bln. (state guarantees are given to 50% of the loan amount—„Kommersant“)”, “Brokercreditservice” analyst Michael Sayno says. “This is positive news for the enterprise implying that it has escaped the threat of becoming a part of a new shareholder’s capital”.

On the other hand, the expert notes that it is still unknown under what conditions the state guarantees have been granted. “Earlier one of the conditions for state guarantees provision was rejection of the tolling scheme of ethane supply from SIBUR to KOS”, he reminds. “However the parties could not agree on the price of ethane for a long time. TAIF offered RUB 6500 per ton and SIBUR - RUB 8500 per ton. Maybe TAIF had to agree with the supplier’s price.” Yesterday SIBUR’s press secretary Rashid Nureev told to “Kommersant” that the issue has not been settled yet and “the negotiations continue.”

Taking into account the “fundamentally high potential” of “Kazanorgsintez” and “its social significance” IK “Finam” analyst Dmitry Terekhov assumes that the question with debt refinancing and rejection of the tolling schemes will be resolved by the end of the year. “Otherwise the guarantees included in this year’s budget will „burn out”. “Such approach to the problem will hardly fit the Russian Government, that’s why it will put maximum pressure upon “Kazanorgsintez” and SIBUR in order to make them come to an agreement”, he thinks.


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