Russia’s Novatek Said to Set Rate on Five-Year $1 Billion Loan

OAO Novatek, Russia’s second-biggest natural-gas producer, set the rate on a loan of as much as $1 billion, according to two people with knowledge of the matter.

Novatek is offering to pay interest at 175 basis points more than the London interbank offered rate for the five-year facility, said the people, who asked not to be identified because the deal isn’t public. The Tarko-Sale, Siberia-based company is self-arranging the deal, which lenders must commit to before the end of the month, the people said.

The interest margin matches those offered on a loan of the same maturity sought by OAO Gazprom Neft, the oil unit of Russian competitor OAO Gazprom, the world’s biggest natural gas producer, according to data compiled by Bloomberg. OAO Uralkali, the largest potash producer by output, is also raising a five-year facility with a higher margin of 215 basis points more than Libor, the data show. A basis point is 0.01 percentage point.

Novatek is rated Baa3 by Moody’s Investors Service and BBB-by Standard & Poor’s and Fitch Ratings, the lowest investment-grade rankings, data compiled by Bloomberg show. Gazprom Neft and Uralkali have the same grades from the ratings firms, the data show.

Novatek is planning to build a $20 billion liquefied natural gas plant on the Yamal Peninsula in Russia’s arctic region with French company Total SA, Chief Executive Officer Leonid Mikhelson said.

Novatek has two dollar-denominated loans totaling $500 million maturing this year, Bloomberg data show. Officials at Novatek weren’t immediately able to comment on the financing.