Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Gazprom Seeking to Borrow $10Bln for Yugansk

LONDON -- Gas monopoly Gazprom is talking to Western banks to raise up to $10 billion to fund the purchase of the key oil unit of embattled oil major Yukos, industry sources said on Wednesday.

Gazprom, the most leveraged Russian company, with more than $15 billion of debt, also said it planned to cut other borrowings to fund core operations by a quarter next year to $3.9 billion, a move analysts said may hurt its gas development projects.

A source familiar with the situation said Gazprom was holding talks with Deutsche Bank and ABN AMRO to raise as much as $10 billion to finance the acquisition of Yukos' key unit, Yuganskneftegaz.

"It's obvious that Gazprom's borrowings would not be limited to just $3.9 billion next year," he added.

ABN AMRO said it was holding discussions with Gazprom but gave no further comment. Deutsche, which is acting as Gazprom's adviser, also declined to comment.

A London-based Russian loan specialist said market talk suggests a $6 billion syndicated bridge loan to a bond issue. Given the tight timeframe, bankers expect any loan to be unsecured.

On Tuesday, Gazprom's oil unit said it would bid on Dec. 19 at an auction for a controlling stake of Yugansk with the starting price set at almost $9 billion. A Yugansk buy would make Gazprom one of Russia's two top oil producers with daily output of 1.8 million barrels, overtaking Saudi Arabia's Saudi Aramco as the world's top hydrocarbon producer.

UBS Brunswick analyst Paul Collison calculated Gazprom had a total of $10.1 billion of available funds as of the end of the second quarter of 2004, including $3.5 billion of cash as well as marketable securities and unused structured export notes.

That makes the Yugansk buy feasible with additional Western financing, but leaves little cash for core gas operations, let alone billions of dollars needed to build new pipelines and put new fields onstream as output from traditional deposits falls.

Gazprom said in a statement its total investment plan would rise to 300 billion rubles ($10.71 billion) in 2005 from 225 billion in 2004, of which 150 billion would be long-term financial investment such as the purchase of Yugansk.

But capital expenditures would decrease to 150 billion rubles from 190 billion this year.