Mitsubishi UFJ dropped out of Tupras bond on Iran concerns

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LONDON, Oct 25 (IFR) - Bank of Tokyo-Mitsubishi UFJ pulled out of a bond mandate for Turkish refiner Tupras due to concerns over the issuer's supply relationship with Iran, two sources away from the deal told IFR on Thursday.

The bank had been originally mandated alongside Citigroup and Deutsche Bank to lead the refiner's debut dollar issue, but decided to pull out at the last minute.

Bank of Tokyo-Mitsubishi UFJ declined to comment.

Tupras, Turkey's only oil refiner, has a waiver over sanctions imposed by the US government on purchases of Iranian oil. Turkey was granted a six-month exemption in June after Tupras pledged in March to cut its Iranian oil purchases by 20%.

The waiver is due to expire in December but it can then be renewed by the US government, with which Tupras is working closely. The expectation is that it will be restored, and if so, Tupras would continue lowering its reliance on Iranian oil imports.

If the waiver isn't renewed then the company would cut its exposure to zero to avoid breaching sanctions. One of the reasons for the bond is to provide financing should that happen.

In 2011, 47% of Tupras's oil purchases came from Iran, according to Fitch. The company is already finding alternative sources for its oil, and although that has made little material commercial difference to Tupras so far, it is an issue that Fitch, which is likely to assign a BBB- rating to the bond, is keeping an eye on.

"A substantial reduction in Iranian imports by Tupras would be treated as an event risk if Iranian crude cannot be economically replaced with suitable alternative sources, and may lead to a review of the ratings depending on the circumstances," it said recently in a note.

Tupras's debut international bond priced Thursday.

"Turkey was granted a six-month exemption in June after Tupras pledged in March to cut its Iranian oil purchases by 20%.The waiver is due to expire in December but it can then be renewed by the US government, with which Tupras is working closely"It raised USD700m through a 5.5-year tenor. The 144a/Reg S deal was announced with initial talk at 350-360bp over US Treasuries before tightening to a final level of 337.5bp over.

The company is also rated Ba1 by Moody's. (Reporting By Davide Scigliuzzo; Editing by Sudip Roy and Matthew Davies)

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