BP’s Venture With Rosneft Seen Abandoning Bid to Cut Loan Margin

BP Plc (BP/) and OAO Rosneft (ROSN) abandoned plans to seek lower borrowing costs for an oil-purchase loan deal and cut the amount they are seeking because of the Ukraine crisis, according to two people with knowledge of the matter.

The fundraising has been shrunk to less than $2 billion from an initial target of $5 billion, according to the people, who asked not to be identified because they’re not authorized to speak about it. Banks committed more than $3 billion in January, the people said.

Igor Sechin, chief executive officer of Russia’s largest oil producer, was targeted by U.S. sanctions this week because the 53-year-old has worked with President Vladimir Putin for more than two decades. BP, Europe’s third-largest oil company, holds about a 20 percent stake in Rosneft and the loans the companies are seeking will be used to finance the London-based firm’s purchase of crude from Rosneft.

Toby Odone, a spokesman for London-based BP, declined to comment on the financing. A Rosneft spokesman, who asked not to be identified due to company policy, also declined to comment.

The five-year loan will pay an interest margin of 200 basis points, or 2 percentage points, more than benchmark rates plus additional fees, according to data compiled by Bloomberg. The borrowers planned to seek a reduction of as much as 90 basis points, the people said.

Bank of China Ltd., Deutsche Bank AG, HSBC Holdings Plc and Lloyds Banking Group Plc were hired to arrange the facility last year, people familiar with the matter said at the time.

Sanctions against Sechin won’t stop traders from doing business with Roseneft, because the state-controlled company itself wasn’t sanctioned and the CEO doesn’t own a majority stake, lawyers and trading executives said April 28.

Reuters reported the reduced size of the BP-Rosneft deal yesterday.

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

To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net Michael Shanahan

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