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Privatbank gets record syndicated loan

Ukraine's largest bank in terms of assets has landed a record $300 million loan from an international syndicate, reflecting foreign financial institutions' growing trust in the country's banking sector, which is increasingly attracting funds from abroad for development.

Dnipropetrovsk-based Privatbank, Ukraine's largest bank by assets, said in an Oct. 25 statement that it would use the one-year loan to finance its clients’ projects and develop its microcrediting business.

Privatbank said that 46 foreign banks, including 31 European and 15 Asian ones, took part as creditors in the largest loan allocated to a Ukrainian bank to date. Barclays Capital, Commerzbank, Standard Bank and UniCredit Group acted as the loan's lead organizers.

Privatbank said that the loan's interest rate of LIBOR+1.8 percent is also the Ukrainian banking sector's lowest to date.

According to Privatbank Board Chairman Oleksandr Dubilet, the loan arrangement was 45.8 percent oversubscribed, with Privatbank receiving an amount larger than originally planned.

"The fact that the credit was more than $50 million higher than the initially declared amount shows foreign banks' increased trust in the Ukrainian banking sector and in Privatbank as the sector’s leader," Privatbank quoted Dubilet as saying in its statement.

According to Oleh Pronin, an analyst with Kyiv-based investment bank Dragon Capital, that trust is based on the sector's "stable international credit history and ratings, good outlook thanks to highter stability, soundness, capitalization, transparency and growth prospects."

"Foreign banks are now more positive on Ukrainian banks, as most of them have a good international credit history in terms of repayment of syndicated loans and Eurobonds," Pronin said. "Thus, foreigners are readily increasing their limits on borrowings to Ukrainian banks."

Pronin added that lending by Ukrainian banks, especially retail mortgages and car loans, has been driving growth in the sector, with an increased demand for cheap, long-term foreign currency funding.

Pronin said that prior to this latest loan to Privatbank, the next biggest loan to a Ukrainian bank was a one-year $115 million syndicated loan to Ukrsibbank at LIBOR+2.95 percent in November 2005, and a one-year $158 million loan received by Privatbank at LIBOR+2.8 percent in October 2005, which the bank has already repaid.

He said that in 2004, Ukrainian banks attracted about $262 million in short and long term international loans; while in 2005, the figure was more than $1.66 billion. That figure stood at more than $1.1 billion for the first half of this year.

Pronin said that Ukrainian companies in general, including banks, have raised $726 million, $2.57 billion and $1.76 billion, respectively, in the same three periods, through various international borrowing, such as Eurobonds, syndicated and subordinated loans.

According to Pronin, foreign borrowings stood at 12 percent of total funding received by Ukrainian banks by the end of the first half of this year, up from 10 percent in 2005 and 7 percent in 2004.

"We expect this ratio at 25 to 30 percent by the end of 2008," Pronin said.

"High cross-border merger and acquisition activity in Ukraine's banking sector also bodes well for the sector's attractiveness to international banks in terms of debt financing," he added.

Foreign capital has been pouring into Ukraine's banking sector, with smaller bank purchases following hot on the heels of landmark deals that saw major Ukrainian bank assets sold for billions of dollars to foreign buyers within the last year.

Starting last fall, cumulative purchases of Ukrainian banks by foreign buyers have resulted in foreign capital occupying nearly a quarter of the total capital in Ukraine's banking sector to date.

Privatbank's assets totaled $5.9 billion as of Oct. 1. The bank belongs to Privat Group, a major Dnipropetrovsk-based holding with interests in Ukraine's metals and banking sectors, which is owned by Ukrainian tycoon Ihor Kolomoyskiy together with two other Ukrainian moguls.

by Stephan Ladanaj, Kyiv Post Business Editor
Nov 09 2006

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