The Chinese CEFC has no money to buy 14% in Rosneft

The completion of the transaction for the sale of 14.16% of Rosneft to the Chinese CEFC was postponed from the end of 2017 to the first half of 2018. The total volume
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The Swiss trader Glencore, which together with the Qatar fund QIA owns 19.5% of Rosneft, plans to complete the sale of 14.16% of the Russian oil company in favor of the Chinese CEFC until the end of the first half of 2018, according to a trader's report published on Wednesday , On 21 February. The regulators still have to approve the purchase, the document says.

On the upcoming deal, the partners announced September 8, 2017. Igor Sechin, the chief executive officer of Rosneft, then said that it would be closed before the end of 2017. But the deal is still incomplete, and representatives of CEFC, Glencore and QIA refused to comment and until recently did not disclose a new deadline when this will be done.

Representative of Rosneft Mikhail Leontiev February 21 declined to comment on why the completion of the transaction was postponed to the first half of 2018. The CEFC also did not respond to the request of RBC

The Rosneft package will cost CEFC $ 9.1 billion, most of this money a private Chinese conglomerate expected to borrow. € 5 billion of the company will allocate VTB on the security of the whole block of shares, the remaining part of the financing was planned to be borrowed from the Chinese state development bank (CDB), Reuters reported citing sources. In general, CEFC planned to borrow 60-70% of the required amount ($ 5.46-6.37 billion), the agency said, citing a representative of the CEFC. Glencore and QIA after the sale of the stake will remain owners of 0.5 and 4.8% of Rosneft shares, respectively.

Glencore and QIA bought a 19.5% stake in Rosneft in early January 2017. Partners paid for the package of € 10.2 billion, most of which were attracted on credit. So, the Italian bank Intesa allocated € 5.2 billion to them, another € 2.2 billion was provided by unnamed creditors (among them was the Russian Gazprombank, as RBC and Vedomosti wrote, citing sources). At the same time, Glencore also signed a five-year contract with Rosneft to supply oil.

However, the partners had to negotiate the resale of most of the package (14.16 of 19.5%) in less than a year because of the difficulties with servicing the loan attracted for its purchase, Sechin explained. According to him, because of the devaluation of the dollar against the euro, the cost of servicing the loan became "quite serious." Sechin welcomed the appearance of a Chinese company among the shareholders of Rosneft and assured that now their pool was formed finally.

Problems with financing

CEFC did plan to raise money in the CDB, say two of RBC's interlocutors close to the Chinese bank. According to one of them, various options for financing the deal were discussed: either the company takes all $ 9 billion in CDB, or attracts private investors as partners, and then replaces their financing with banking.

CEFC in January 2018 invited private Chinese investors to participate in the transaction as part of the consortium, confirmed the interview with RBC in one of the Chinese companies that received such a proposal. According to him, CEFC was looking for investors for $ 2 billion and guaranteed that it will buy out their shares of Rosneft in three years, and investors will earn on the growth of the value of securities. But a few weeks later, the CEFC withdrew its offer, continues the interlocutor of RBC.

As of the end of January, the CEFC still has not agreed on funding, according to two sources of RBC, close to the CDB. One of them says that the issue was not resolved in the middle of February. "CEFC is working hard to resolve the funding problem," he said.

CEFC is a private company, this is the reason for the problems with attracting finance in China, explains the source close to CDB. Last year, the Chinese government decided to streamline the deployment of private Chinese investment abroad and seriously tightened control over capital flows, the South China Morning Post reported. In particular, in December, the Chinese authorities ordered private investors to notify the government of their plans, and to obtain permits for "particularly sensitive transactions". The government also recommended that Chinese investors be more careful with projects requiring entry into serious loans. Moreover, Chinese regulators have compiled a list of risky borrowers from among Chinese private companies. It included, in particular, Wanda, Fosun, Anbang and HNA, claimed South China Morning Post. In January 2018, almost a month after tightening control over foreign investment, the Chinese Fosun Fund refused to buy a 10% stake in the Russian company Polyus, which the partners agreed on as early as May 2017.

A source close to the CDB told RBC that the Chinese authorities recommended cautiously lending to the CEFC. "If the CEFC were a state-owned company, they would get a loan very quickly. But this is a private fund to which the CDB has already provided a large loan and which the authorities recommended to finance with caution, "- says the source of RBC. Nevertheless, two sources of RBC, close to the CDB, do not see the risk of rejection of the deal.

Rosneft did not address the government with any problems; in our understanding, it takes more time to close the deal, "the federal official said. In general, the government is not so important: shareholders resell shares, the budget has already received its money, he recalls.

The promise to close before the end of the year the deal announced in September initially looked fantastic - usually deals with the Chinese are being prepared for at least nine months, RBC's interlocutor in the Chinese company adds. The representative of the CEFC did not answer RBC's questions about the financing of the deal sent three weeks ago. He also did not respond to a request sent on Wednesday, February 21.

Most likely, the closing of the deal is really delayed because of the Chinese side, it's unlikely that the problems arose with the sellers, says analyst Andrei Polischuk Raiffeisenbank. The delay is unlikely to be tied to the price - it is understandable and corresponds to the valuation by which Glencore and QIA bought shares of Rosneft last year, the analyst believes. Probably, CEFC settles some issues with the Chinese government and regulators, which last year severely tightened control over the outflow of capital, the expert concludes.