Gazprom Neft Said to Seek Lower Rate on $1 Billion 5-Year Loan

OAO Gazprom Neft (GAZ), the oil unit of Russia’s natural-gas exporter, is seeking a new loan of at least $1 billion at a lower interest rate than it obtained in April, according to two people with knowledge of the financing.

The state-run company is offering to pay a margin of 150 basis points, or 1.5 percentage points, more than the London interbank offered rate on a five-year term debt, said the people, who asked not to be identified because the transaction is private. That’s 25 basis points less than what it pays on a $700 million portion of a $1 billion facility raised in April, according to data compiled by Bloomberg.

Gazprom Neft is seeking to borrow as much as $2.2 billion this year to help it double production to 100 million metric tons of oil by the turn of the decade, Chief Financial Officer Alexey Yankevich said last December.

“It’s a sin not to borrow with such a low debt load and good rates,” Yankevich said.

Investment-grade Gazprom Neft is raising the debt after Russian fertilizer producer OAO EuroChem, which has a junk credit rating, obtained a $1.3 billion unsecured loan with a 180 basis-point margin last month, Bloomberg data show. Gazprom Neft is rated Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s, the lowest investment-grade rankings, while EuroChem is rated two steps lower at BB by S&P, the data show.

Officials at the Moscow-based company didn’t immediately return telephone calls seeking comment.

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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