Gunvor secures credit facilities to help Asia expansion plans
Gunvor, the Swiss-based oil trader caught up in the political confrontation over Ukraine, has received $350m of commitments for new borrowing facilities that will help to finance the group’s expansion plans in Asia.
Last month, the US Treasury placed sanctions on Gennady Timchenko, the co-founder of Gunvor, and claimed that Russian president Vladimir Putin was a secret investor in the company.
Gunvor, the world’s fourth-biggest oil trader, has strenuously denied the allegations and Mr Timchenko has sold his stake, but the oil industry has been closely following the company for any signs of distress.
Gunvor has risen from being a niche Russian player a decade ago to one of the world’s largest independent oil trading companies. The company now handles the same volume of oil that is consumed by France.
The launch on Monday of a revolving credit facility is a key test for the company, which has been on a drive to restore confidence since the public accusations by Washington.
Trading houses, which are largely privately held and carry little long-term debt, are heavily reliant on short-term loans and credit lines from banks to finance their operations. In a fiercely competitive marketplace, where margins are razor thin, a company’s cost of funding can have a large impact on its profitability.
An initial post-sanctions panic saw the yield on Gunvor’s $500m bond jump from 7.4 per cent to more than 12 per cent. It has since fallen to 8.54 per cent as a majority of Gunvor’s lenders have confirmed their support.
Interest charges on Gunvor’s new credit line will be slightly below the level of last year’s Asian $850m revolving credit facility (RCF), according to people familiar with the situation.
A mixture of existing and new lenders are among the banks that have pledged the initial $350m. However, Sumitomo Mitsui Banking Corporation, which has stepped back from Russian-related lending, is not involved this time.
The new facilities, which consist of a one-year and a three-year tranche, are expected to increase in size as Gunvor and its financiers approach other banks. The deal will close in June.
In a statement Jacques Erni, Gunvor’s chief financial officer, said a number of “core banks” had already committed to join the syndication. “We’re very happy with the support we’ve seen from our banking partners,” he said.
The new RCF will be used to replace a maturing credit line and support Gunvor’s expansion strategy in Asia, which has a metals focus. The trader has set up a base metals desk in Singapore and recently opened an office in Shanghai to trade refined copper, as well as zinc and tin.
Gunvor, which was founded by Mr Timchenko and Torbjorn Tornqvist in 2000, started with a focus on trading Russian oil, securing much of the supply of Russian majors Rosneft and Surgutneftegaz.
In recent years, Gunvor has diversified away from Russia and now only a fifth of its trading volumes originate there. However, the company still has a commanding position in the oil products market through its ownership of the Ust-Luga terminal in the Baltic sea.
Earlier this month, Gunvor reported strong results for 2013, bucking a generally downbeat environment for oil traders.