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Silvinit shareholders approve terms of Sberbank loan

By Finam

The outcome of an EGM held at Silvinit on October 22 was released on October 23. The top issue on the agenda was the approval of a Sberbank loan, which the company needs to refinance its debt to VTB. Under the terms of the loan, the bank pledges to open two credit lines, worth USD 1.115 billion and USD 400 million, respectively, for five years. The loan carries a floating interest rate on 3M LIBOR+ terms. The size of a spread over LIBOR will hinge on additional conditions that may be set by the bank, such as the set level of turnover on an account with Sberbank. Covenants on the loan include a cross default provision and a restriction on Silvinit Group’s debt/EBITDA ratio to 3.

The original USD 1.5 billion three-year loan was secured from VTB in 2008 at LIBOR+10.25% to finance the purchase of the Polovodovsky section of the Verkhnekamsk potassium-magnesium salt deposit. The first tranche of the loan fell due on July 27, but the company has managed to agree with the bank on extending the repayment deadline to October 27. During the time left, the company needs either to reach an agreement with VTB or find a means to restructure the debt.

The fact that the terms of the loan have been approved by shareholders does not necessarily mean that the loan itself will be released. However, the extent of specification of loan terms in the shareholder’s decision shows that all the necessary agreements with the bank have in effect been reached. We estimate the likelihood of a loan deal being finalized with Sberbank as very high. The success of any debt restructuring deal would be unequivocally positive news for Silvinit.