Gunvor Group Ltd. is preparing an inaugural bond issue early next year to diversify its long-term funding and increase transparency to investors as it expands its business beyond Russian crude oil.
The trader will announce the banks arranging the unrated dollar bond, which is likely to have a five-year tenor, by the beginning of January, Jerome Schurink, Gunvor’s chief financial officer, said in an interview from Geneva. The company also obtained a $100 million loan today to finance its acquisition of a distressed German refinery, he said.
“Issuing a bond will be a first step in this market and will further increase transparency to our investor base,” Schurink said by phone. “As we go along that process we will consider getting a credit rating. We will see the reaction of the market.”
Billionaires Gennady Timchenko and Torbjorn Tornqvist founded the Cyprus-registered company in 1999 to trade Russian oil, and are seeking to diversify its business beyond the commodity. Gunvor bought two European refineries from insolvent Petroplus Holdings AG (PPHN) this year as well as stakes in the TAL Transalpine pipeline and a coking coal project in Russia’s Sakha Republic.
The $100 million, five-year secured loan backs the acquisition of the Ingolstadt facility in southern Germany from Petroplus, Schurink said. Deutsche Bank AG and VTB Bank OJSC (VTBR)’s Austrian unit underwrote the debt and will syndicate the loan to smaller German, Austrian and Swiss lenders next year. The company paid a margin of less than 5 percentage points for the amortizing loan, which has a six-month grace period, he said.
Gunvor is reorganizing its balance sheet to longer-dated loans and bonds as it branches out from trading and buys refining and oil-transportation assets. The company lost a crude tender worth about $12 billion from Russia’s state-run OAO Rosneft Russia this year, Chief Executive Officer Tornqvist said Sept. 20. Even so, trading remains a focus and volume increased 10 percent this year compared to the last, company spokesman Seth Peitras said by e-mail.
“At the moment our balance sheet still looks like that of a typical trading company, where there is a pretty large balance sheet number with lot of short-term financing, assets and receivables” Schurink said. “But over time now we are adding longer-term assets which are balanced by longer-term debt. The bond is an example of this.”
Gunvor will complete the bond issue before the end of the second quarter, he said. The company signed more than $3 billion of loans this year, predominately to refinance existing debt and also fund acquisitions, according to data compiled by Bloomberg.
The trader plans to extend borrowing-base facilities, similar to the $625 million loan it raised for its Antwerp refinery in October, into projects in the Middle East and Singapore in 2013, the CFO said. Such loans are a type of secured debt used by commodity companies to provide them with cheaper financing, and are used to purchase crude oil and other materials for use at refineries.
Gunvor’s profit this year will be in the “upper range” of Timchenko’s estimate of $300 million to $400 million, with turnover unchanged or higher than the previous year, Tornqvist said in September.
Russian crude and oil products account for more than 25 percent of Gunvor’s trading volumes, the CEO said, and may decline as the company expands globally.
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