LUKoil Gets $1.3Bln Unsecured Loan

LUKoil on Tuesday said it received a three-year, 1 billion euro ($1.3 billion) loan from Gazprombank, which offered the oil giant a relatively attractive 8 percent rate on the unsecured credit.

The loan will go toward capital expenditures and refinancing, said Dmitry Dolgov, a LUKoil spokesman. He declined to give a more detailed breakdown, saying only that the majority of the cash would be used to refinance loans for acquisitions made in 2008.

The company's biggest purchase last year was in June, when it spent 1.35 billion euros for a 49 percent stake in Italian refiner ERG's Mediterranean plant. In December, the company secured loans from ING Bank, ABN Amro Holding and Barclays worth a total of $800 million to help pay for the stake.

Dolgov said the interest rate was worse than what the company could get before the economic crisis, but he praised the loan for requiring no collateral.

"I think it's a very good deal. We didn't pledge either shares or export revenues," he said.

The loan appears to be the second largest in LUKoil's history, topped only by a $2 billion credit in 2005 to buy assets in Kazakhstan.

LUKoil needs to repay "several hundred millions dollars" this year, Dolgov said.

The company is the second in the Russian oil industry to receive a hefty loan from Gazprombank this year. Last week, pipe maker TMK said it raised $1.1 billion from the lender to repay a loan it took in 2008.

On Monday, coal and steel firm Mechel received a $1 billion loan from Gazprombank. The rate on that loan was 15 percent, a source close to the deal told Vedomosti.

Alexander Zakharov, co-head of equities at investment bank Metropol, said Gazprombank has been attracting a steady flow of clients in recent weeks because it is more flexible than Vneshekonombank and VTB, which are both directly state controlled.

It may be offering better terms because it is able to adapt more quickly to the improving liquidity situation and the ruble devaluation, which made the outlook better for commodity exporters, Zakharov said.

"VTB and VEB are more bureaucratic organizations," Zakharov said. "Gazprombank has more cards in its hand to give more favorable terms."

Gazfond, Gazprom's nonstate pension fund, owns 50 percent plus one share in Gazprombank. The gas company owns 41.7 percent, according to Gazprombank's web site.

Gazprombank could not be reached for comment.

The government has switched tactics in dealing with the crisis, signaling last week that it would focus on crediting the banking sector after earlier promising $50 billion in loans from VEB to help industry refinance foreign debt.

LUKoil earlier decided not to apply for the state development bank's money because it found the terms unattractive.

Artyom Konchin, oil and gas analyst at UniCredit Securities, called it "a positive signal that in this economy a company could get a loan at such a great rate, with no collateral except their word."

Ronald Smith, head of research at Alfa Bank, was less enthusiastic, saying the favorable terms were normal for a "state-influenced bank making a loan to a huge oil company."

"Oil companies are hurting, but the sector is not as badly off as some others, so you wouldn't see any exorbitant rates here," he said.

Oil companies have complained about high oil export duties cutting into their profits and have lobbied the government heavily for assistance. The duties, which were previously calculated once every two months, left producers exporting at a loss as oil prices fell faster than the tariffs.

LUKoil chief Vagit Alekperov told The Wall Street Journal earlier this month that the industry needed $10 billion in tax breaks this year to reverse declining production.

On Thursday, Prime Minister Vladimir Putin will meet with heads of some of the country's largest oil firms in Kirishi, outside St. Petersburg.