Inside Out: 2018 Uralkali Financing

The Players:

• Counsel for the Lenders: Victoria Bortkevicha, Partner, Clifford Chance Moscow
• Counsel for Uralkali: Elena Tchoubykina, Partner, CMS Moscow

CEELM: Victoria, how did you and Clifford Chance become involved with the banks in this matter? How were you selected as external counsel initially, and when was that?

V.B.: For the past few years we have represented many banks from the syndicate on various other financings, including several English law governed pre-export facility agreements, and I believe that our experience was the reason for sending us the RFP and choosing our team to work on that transaction. Another reason was that we worked as bank counsel on pre-export financing arranged by the lenders for PJSC Uralkali last year and were very delighted to be approached by the parties to act as the bank legal counsel on the current transaction. We were approached by the banks in May 2018. As the timing of the closing of that transaction was rather limited, we were selected very quickly after we provided our proposal.

CEELM: How about you, Elena? How did you and CMS come to represent Uralkali in this matter?

E.T.: Uralkali is a long-standing client of mine, and we have been representing them in their finance transactions for a while now. These include similar pre-export finance transactions, ECA-backed arrangements, bilateral loans and factoring. Since CMS advised Uralkali on their previous PXF deals, they came to us for assistance with this new financing.

CEELM: What, exactly, was your initial mandate when you were first retained for this particular project?

V.B.: We were appointed by the banks once the term sheet was agreed. It was also agreed that first draft of the facility agreement would be prepared by the borrower’s legal counsel and we would prepare first drafts of the security and other documents. We assisted the banks during the negotiations with PJSC Uralkali and their legal counsel and in the course of signing of the finance documents.

E.T.: It was rather straightforward – advising the borrower on its repeat PXF facility which has a fairly standard structure previously accepted by the parties. Availability, adherence to the tight timetable for closing, and our ability to navigate through the documentation, having all necessary background knowledge, were among other conditions for our appointment. 

CEELM: Who were the members of your team, and what were their individual responsibilities?

V.B.: The transaction team, which worked under my direct coordination, included Senior Associate Jan Galin and Associates Arina Skrebkova and Anna Semenova. I (as English law-qualified Partner) and Jan were primarily dealing with the reviewing and negotiating of the facility agreement, and Arina and Anna were primarily responsible for the drafting and negotiating of the security documents and CPs.

E.T.: The core team was rather compact: Ana Radnev, a Prague-based partner, Alexander Zhuravkov, a Moscow associate, and myself. I was responsible for co-ordination and day-to-day assistance.

CEELM: How was the financing structured, and how did you help it get there?

V.B.: The project consisted of a pre-export financing for PJSC Uralkali arranged by 14 lenders. This new financing replaces the financing provided by the lenders in 2014. As the current facility agreement and related documents were based on the existing pre-export financing documentation dated from 2017, our work was less substantial than other financing transactions where we have to start from scratch.

E.T.: This is a typical PXF facility secured by a cash stream under assigned export contracts which is accumulating on charged collection accounts. The only difference from the previously used structure was that the collection accounts were opened in the UK so we had to negotiate the relevant security document from scratch. Our key contribution was the good knowledge of the transaction structure and the precedent documentation. We were able to deal with the banks’ requests and queries quickly and efficiently.

CEELM: What would you describe as the most challenging or frustrating part of the process?

V.B.: As we were primarily advising ING Bank N.V., acting as one of the facility coordinators and the documentation agent of the facility provided by a group of 14 banks, the most challenging part of the matter was aligning the interests of all the banks involved in the transaction, along with time, as the transaction was completed less than two months from kick-off. 

E.T.: It is difficult to refer to challenging or frustrating matters in the process of the deal closing except for the sanctions-related matters which always get discussed – but this has become a new norm for the Russian finance market (even LMA has introduced standard sanctions language now). Having said that, sanctions-related provisions always get discussed – whether because the new lenders are entering into the transaction or because of the changing sanctions regime. This happened on this deal too, and the main challenge was to find a compromise that would suit the client and give sufficient comfort to the banks’ compliance teams.

CEELM: Was there any part of the process that was unusually or unexpectedly smooth/easy?

V.B.: Syndicated financings with large number of participants (such as this transaction) may take long between kick-off and closing and usually require a lot of organizational effort from all sides. A very professional attitude and extraordinary organization on all sides allowed us to have all finance documents drafted, negotiated, and signed within six weeks from kick-off, which allowed us to achieve a successful closing within the deadlines set by the parties. 

E.T.: You could say so. This is the second PXF facility for Uralkali which we worked on opposite Clifford Chance, which represented the banks. So the negotiation process was smooth. It’s always a pleasure to deal with their reputable and professional team in Moscow.

CEELM: Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?

V.B.: The mandate was clear from the beginning, as pre-export financing is one of the core types of transactions that our firm usually does on the market, and as everything was on track, the final result matched our original mandate.

E.T.: We did not go beyond our original mandate – the deal closed as originally anticipated.

CEELM: What individuals at the banks directed you, Victoria, and how would you describe your working relationship with them? 

V.B.: On the banks’ side, the coordination was done primarily by Evgeny Gaevskiy (Director, Syndicated Finance) and Adelina Toader (Vice-President, Oil & Gas and Fertilizers Structured Finance). Coordination was perfectly arranged, and it was one of the key reasons why this transaction went so smoothly. In addition, we also worked closely with Credit Agricole Corporate & Investment Bank teams, as Credit Agricole Corporate & Investment Bank acted as the facility agent and the security agent on this transaction. It was very easy to have a good working and personal relationship with both the ING and Credit Agricole teams because they are good communicators – very much to the point and easy to work with. I and my team enjoyed working with them.

CEELM: What about you, Elena? Who at Uralkali directed your work, and how would you describe your working relationship with them? 

E.T.: We work closely with both Uralkali’s corporate finance and legal teams. Our key contacts at Uralkali were Anna Tsaturyan, Head of Corporate Finance, and Maxim Subbotin, Head of Corporate Projects Support Department. All the team members are very experienced and pragmatic and were very clear as to the goals they wanted to achieve in this transaction. We simply had to match the approach. It is important to build a relationship which goes beyond formal communications in order for you to become a “go to” advisor, which we also tried to do.

CEELM: How would you describe the working relationship with your counterparts at CMS on the deal, Victoria?

V.B.: All communication with CMS was very professional and productive. I believe we understood each other very well throughout the negotiation process, which was helpful given the challenging timeframe of the transaction.

CEELM: And what was the working relationship with your counterparts at Clifford Chance like, Elena?

E.T.: This and last year we have worked opposite Clifford Chance on a number of finance transactions and we have always managed to find solutions that were satisfactory to both sides. So it’s definitely a good working relationship – we would be happy to cooperate with them on other projects.

CEELM: How would you describe the significance of the deal?  

V.B.: Given the current complex political situation and the sanctions regime imposed on Russia, syndicated financings of this type and magnitude are less frequent these days. We believe that this deal sends an important message that the international banks are still interested in the Russian market, and it can also act as example for other major Russian companies looking to finance their operation by international financial institutions.

E.T.: The deal indicates that notwithstanding the current political climate and sanctions regime there are Russian borrowers like Uralkali who can successfully raise financing with international lenders, and such lenders are still willing to accommodate their borrower’s requests as to the commercial terms of transactions and timing. I guess this also makes international law firms in Moscow “cautiously optimistic” about their potential work.

This Article was originally published in Issue 5.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.