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The deals below demonstrated the greatest innovation and determination in the face of challenge.
Deal: Bosch Siemens – RMB Export financing
European corporates look to Asia
Lead arranger: KfW IPEX-Bank
Participant: UniCredit Bank
Amount: RMB 100 million
Tenor: 5 years
Lawyers: Sheppard Mullin Richter & Hampton
Exporters: Bosch and Siemens
KfW IPEX-Bank has led a renminbi-denominated (RMB) export financing for German corporates Bosch and Siemens. Proceeds will go towards the design, construction, and operation of a refrigerator production plant in Chuzhou, Anhui Province in the People’s Republic of China (PRC).
The RMB 100 million ($16 million) facility has a five-year tenor and UniCredit joined the deal at participant level, taking on 50% of the debt and risk. The deal was signed in May last year and achieved first drawdown in September 2014.
Bosch and Siemens among several other European corporates are looking to Asia in order to grow their portfolios, as export financing opportunities dry up in Europe. Furthermore, as China’s regulatory environment loosens to further foreign investment, the RMB has become a more viable and effective currency for cross-border trade and investments.
In Germany, there is an increasing demand for RMB-denominated business and Frankfurt has already become a RMB offshore clearing centres. Various banks’ economists have forecast that approximately 28% of Chinese international trade will be conducted in RMB by 2020, according to the International Finance Corporation. This deal therefore, reflects a strong economic rationale and a high degree of market insight.
By concluding the deal in RMB, the participants will reduce trading costs, saving on foreign currency conversions. It will also encourage the participation of smaller-scale Chinese regional banks for future RMB-denominated export finance transactions that may not have the capacity to partake in US dollar funding.
KfW IPEX-Bank remains active in the manufacturing and industrial sectors, support a wealth of German corporates. The German development bank is well-equipped to participate in the internationalisation of the RMB and has capabilities to settle German corporates into Chinese trade.
Deal: Burgos wind farm – ECA-backed project financing
ANZ leads Philippines’ first ECA-backed wind deal
MLAs: ANZ, Nord LB, DZ Bank, ING, Maybank
Lenders: Philippine National Bank, BDO Unibank, Security Bank Corporation, Land Bank of the Philippines, PNB Capital and Investment Corp, SB Capital Investment Corp
Borrower: Energy Development Corporation
Amount: $315 million
Tenor: 15 years
Lawyers: Herbert Smith Freehills, Clifford Chance, Puno & Puno, Picazo Law, Kromann Reumert
Exporters: Vestas Australian Wind Technology
The 150 megawatt (MW) Burgos wind farm project is the first wind farm applying non-recourse project financing in the Philippines to reach financial close. Comprising a dual-currency structure, the deal is also the first to be financed under the country’s new feed-in tariff regime.
Energy Development Corporation (EDC) formed a special purpose vehicle for the deal – EDC Wind Power Corporation – in order to structure the transaction and attracted a global group of lenders. The project sponsor also obtained export credit agency (ECA) finance from Denmark’s EKF, securing wind turbines from Vestas.
The client sought a non-recourse structure in order to accommodate the fact that construction had already commenced. Commencing in June 2013, the project was funded by a portion of equity and contracted under three separate EPCs: one for turbines, another for the substation and the final contract was for the farm’s transmission.
Given the Philippines was unchartered territory for ECA finance, finalising a financing structure was challenging. The structure needed to accommodate for a project that had commenced with documentation in place, separate tranches in US dollar and Filipino peso, work without an offtake agreement in place and work through a lack of certainty surrounding the government’s new regulatory feed-in tariff.
Furthermore, because documentation was already in place, the entities on the deal had to work with the replacement of a key sub-contractor while the project was mid-construction. This required further consideration of the project’s critical path items and revision of its completion timetable.
In order to obtain the 15-year tenor and secure turbine imports from Vestas, the project sponsor and banks needed to incorporate assistance from EKF. With EKF’s support, the Burgos wind farm is the largest wind farm in the Philippines to date. The financing incorporates equity as well as domestic and international debt alongside ECA support.
Deal: Long Phu and Duyen Hai Power – ECA-backed untied financing
Citi and NEXI repeat untied financing in Vietnam
Borrower: National Power Transmission Corporation
Amount: $245 million
Tenor: 13 years
Lawyer: Clifford Chance
Vietnam’s National Power Transmission Corporation (NPT) successfully signed and closed another export credit agency-backed facility with Nippon Export and Insurance Investment (NEXI). Citi returned to the deal after the bank signed a similar deal with NPT in 2011.
With a 13-year tenor, the $245 million loan was signed under NEXI’s untied loan insurance programme. The transaction also features 100% commercial and political risk insurance covering payments of principal and interest. NEXI’s support for the deal was obtained by demonstrating the tangible benefits of the project for Japanese companies operating in Vietnam as well as broader infrastructure benefits.
Citi arranged the term loan and syndicated this to a wide number of regional Japanese lenders. For two of those banks, it was their first to be insured under NEXI’s untied loan insurance programme. The financing package includes two term loans and come guaranteed by Vietnam’s Ministry of Finance.
The proceeds will be used to construct power transmission lines and substation projects that will transmit electricity from Long Phu and Duyen Hai power centres. The electricity will be transmitted to industrial zones in Soc Trang and Hau Giang provinces as well as Can Tho and Ho Chi Minh cities.
Vietnam has a national shortage of electricity and the central government is attracted to export financing due to longer tenors. This deal contributes to the stable supply of electricity in Vietnam and fosters a healthy business relationship for Japanese exporters and manufacturers investing in Vietnam.
This is a repeat transaction for the three parties. Citi arranged a $200 million loan in 2011 under NEXI’s untied loan insurance programme for NPT.
Deal: Fortescue Metals – Iron ore prepayment
ANZ pioneers repeat iron ore prepayment
Lenders: Undisclosed syndicate of banks
Borrower: Fortescue Metals Group
Amount: $500 million
Tenor: 2 years
Lawyer: Norton Rose Fulbright, Clifford Chance
Exporter: Fortescue Metals Group
ANZ Commodity Trading, a fully-owned subsidiary of ANZ Bank completed a $500 million two-year prepayment that has secured offtakes of iron ore from Western Australia-based Fortescue Metals Group (FMG).
ANZ Commodity Trading structured the deal bilaterally with FMG and then syndicated the transaction to an unknown group of lenders. Therefore, ANZ has acted as the buyer in this deal and has prepaid the $500 million loan. The Australian bank has procured sufficient interest from iron ore buyers throughout Asia with a pre-agreed shipment schedule, which is embedded in FMG’s offtake contract.
Dealing with a volatile commodity like iron ore can result in fluctuating price, but the transaction saw a good appetite from the lending market, all of which were keen to sign the transaction in such a short time frame. Amid a difficult time for iron ore and commodity prices in 2014, the deal signed in a mere three weeks, according to Erwan Cesbert, regional head of sales for ANZ’s structured trade finance team in Singapore.
In Australia country risk is low, so the appetites for prepayments and pre-export financings are low. The market is catching up therefore the supply is not large. Bu Cesbert says many Asian corporates are looking at Australia and its large supply of iron ore reserves.
The FMG prepayment is also a repeat deal. The latest $500 million prepayment follows up a successful $250 million transaction closed in November 2013. FMG has grown to become Australia’s third-largest exporter of iron ore behind Rio Tinto and BHP Billiton.
In early 2014, FMG completed a $9 billion expansion across port, rail and mining operations. Its operations are based within the iron ore-rich Pilbara region of Western Australia. The company has two key production hubs, the Chichester and Solomon operations.
Deal: HCL Technologies – UPAS Structured financing
Citi champions off-balance sheet LC deal
Borrower: HCL Technologies
Amount: $400 million
Tenor: 360 days
HCL Technologies Limited, a global IT services company valued at approximately $5.1 billion, has pioneered an emerging market transaction using four currencies. This deal has adopted a customised usance letter of credit (LC) payable at sight (UPAS), an instrument that ensures the company’s suppliers get paid at sight by Citi under the terms of the LC.
Citi structured the transaction as an advisor and now issues and discounts the LCs covered under the UPAS structure for more than 60 suppliers. Citi’s portion is $100 million and the purpose of this deal ensures it is structured off balance sheet. It is effective across working capital management in India, Norway, Singapore, the USA and Sweden. The facility is also able to be drawn in Indian rupees, Singapore and US dollars and Norwegian kroners.
In trade finance, a UPAS structure refers to a LC agreement where the issuing bank, in this instance Citi, grants financing for the importer. The importer makes a forward payment whereas the exporter makes sight collection from the drawee bank that is responsible for the discounting. Generally, the importer affords the discounting expenses and interest for overdue payments.
The deal was the first OPAS structured transaction involving local and FCY suppliers for an Indian company. It also serves to promote a sustainable supply chain mode, which has caught on rapidly with deal replication across multiple sectors.
Citi was chosen by HCL Technologies as the preferred banker for supplier finance expansion across the globe, thereby turning this structure into a universal supplier engagement programme. HCL Technologies is headquartered in India.
Deal: Ho Chi Minh Highway – ECA-backed infrastructure financing
Japanese lenders flock to Vietnamese highway deal
Participants: Aozora Bank, Bank of Yokohama, Chiba Bank, Chugoku Bank, Fukuoka Bank, Gunma Bank, Hachijuni Bank, Hyakugo Bank, Hyakujushi Bank, Iyo Bank, Joyo Bank, Nomura Trust and Banking, San-In Godo Bank, Senshu Ikeda Holdings, Shizuoka Bank, Yamaguchi Financial Group
Borrower: Special purpose vehicle under the Vietnamese government
Amount: $510 million
Tenor: 3 years + 9 years
Lawyer: Clifford Chance
This $510 million financing shows the Japanese regional banks’ strong appetite for transactions beyond Japanese shores. With a three-year construction period plus a nine-year repayment maturity, this transaction incorporates a lengthy tenor alongside 16 Japanese lenders and Nippon Export and Insurance Investment (NEXI).
Japan’s banks continue to look at financing outside Japan and this deal highlights a keen interest in export credit agency (ECA) financing from the country’s regional players. For three banks – San-In Godo Bank, Iyo Bank and Senshu Ikeda Bank – it was their maiden transaction in export finance.
Japanese corporates are also hungry to obtain infrastructure, power and energy contracts in emerging Asian markets such as Vietnam. This deal confirms that Japan’s banks and ECAs are behind them as the country looks to secure its exports.
Financing opportunities have stagnated in Japan, so naturally the regional banks are looking for opportunities to expand abroad. Considering these smaller lenders do not have an overseas presence, it was important the deal secured the services of the Bank of Tokyo-Mitsubishi UFJ (BTMU) at mandated lead arranger level. BTMU led the syndicate through an environment it is already present in.
NEXI provided 100% political risk and 95% worth of commercial cover on the deal and acted as a backstop for the 15 regional lenders. The proceeds are going towards the construction of the La Son and Tuy Loan sections of the Ho Chi Minh Highway Express. The project is being built under the build, operate and transfer model.
The La Son to Tuy Loan section is approximately 82kms long. It will feature four lanes and a further 4.68km of connecting lanes to National Highway One. Total investment cost is approximately $977 million.
Deal: ICBC Financial Leasing – ECA-backed aircraft financing
Citi delivers aircraft financing combo
Borrower: Washington Aircraft 1 Company
Amount: $316 million
Tenor: 12 years
ECA: US Ex-Im
Lawyer: Clifford Chance
Aircraft lessee: ICBC Financial Leasing
Citi acted as mandated lead arranger, sole lender, bookrunner and facility agent on a well-structured aircraft financing involving ICBC Financial Leasing and the Export-Import Bank of the United States (US Ex-Im). The proceeds from the US Ex-Im guaranteed loan funded the purchase of two Boeing aircraft.
In order to comply with China’s foreign guarantee restrictions, Citi worked in tandem with US Ex-Im and ICBC Financial Leasing in order to complete the structured financing. The first aircraft for approximately $148 million was delivered to ICBC and the company then worked with a commercial airline that took final delivery of the aircraft.
Showcasing its innovative security structure, the second aircraft was structured and funded separately via the capital markets. Should the facility exercise its capital markets takeout option, the option would make ICBC the first leasing company in China to issue US Ex-Im guaranteed bonds.
Boeing export two Boeing 777-300 ER aircraft and with a 12-year tenor, should be able to lease the aircraft out over a long-term period. The deal also represented Boeing’s first US Ex-Im-supported financing to a Chinese leasing company.
ICBC Financial Leasing was founded in 2007. It is the first financial leasing company to be affiliated with a bank in China. It has a fleet of 337 actively managed aircraft, 112 of which are in operation already.
Washington Aircraft 1 Company is a special purpose vehicle set up to help facilitate the onshore and offshore aspects of the deal.
Deal: IFC and Levi Strauss & Co. – Reverse factoring and supply chain financing
IFC champions ethical textile financing
Lender: International Finance Corporation
Borrower: Levi Strauss & Co.
Platform: GT Nexus
Amount: $1.4 billion
The International Finance Corporation (IFC) sealed a reverse factoring deal to help garment suppliers in developing countries become more eco-friendly and labor conscious. The IFC and Levi Strauss have teamed with GT Nexus, a cloud-based business network and platform for trade and supply chain management. The deal provides post-shipment finance to suppliers based upon acceptance of buyer receivables.
Through the IFC’s global trade supplier finance (GTSF) programme, suppliers around the world will gain access to competitively priced financing based on their environment, health and safety and labor standards score. This will be measured by Levi Struass & Co’s terms of engagement. This deal incentivises suppliers to improve their ethical standards. The better the score, the more favourable their financing becomes.
Incentives include a 100% advance payment rate and payment provided within two days after the buyer’s acceptance, enabled by GT Nexus’s platform. Other incentives include reduced discount rates, no annual facility fees and no changes to existing banking relationships.
Customer demand for fair labor and environmentally responsible manufacturing continues to grow and costs surrounding regulations will increase. This deal highlights the importance of collaboration throughout the supply chain and encourages buyers, suppliers, and financiers to work together to achieve social compliance and profitability.
The deal also highlights the importance of financing small-sized businesses. Capital costs, which go into fixed costs like infrastructure, can run high. Without access to low-cost financing such as the GTSF programme, many smaller suppliers cannot trade efficiently.
The GTSF programme is a multicurrency investment and advisory scheme that provides short-term finance to emerging market suppliers and small and mid-sized exporters. The programme has sealed $1.4 billion in cumulative commitments and financed over 800 suppliers. Nine countries have participated in the programme – China, Mexico, Ncaragua, India, Indonesia, Sri Lanka, Thailand, Vietnam and Bangladesh.
Deal: Marco Polo – Trade securitisation
IFC and Credit Agricole seal novel securitisation
Financial institutions: Credit Agricole, International Finance Corporation
Amount: $2 billion
The Marco Polo transaction saw the World Bank’s International Finance Corporation (IFC) guarantee a portion of a $2 billion credit risk transfer securitisation for Credit Agricole – the largest structured financing the IFC has done. The deal was based on a portfolio of trade finance assets linked to emerging markets.
In a bid to lower Credit Agricole’s regulatory capital costs, the IFC provided $90 million worth of credit risk protection on a wide variety of emerging market loans the bank has, such as infrastructure lending in Egypt. The IFC’s aim is to provide more credit to developing countries in a more efficient way.
This novel transaction is an example of a synthetic securitisation or regulatory-capital trade, which involved banks purchasing credit risk protection on a portfolio of loans. Using this structure has freed up Credit Agricole’s regulatory capital, enabling it to increase its lending while the providers of the credit protection can earn a return. The structure has also been set up to account for emerging market risks such as unstable regulatory conditions.
With heightened regulatory costs in trade, Credit Agricole and the IFC were able to implement different innovations into the structure. Through a singular supranational investor, the specificity of trade for a securitisation ensured the banks could leverage trade finance’s small-sized loans and shorter tenors. The deal also recognises the high turnover of trade finance’s assets. The securitisation has a monthly replenishment in order to ensure it complies with the high rotation of trade finance assets.
Signed in June last year, the Marco Polo deal relies on a portfolio of trade finance assets and involved 25 internal teams at Credit Agricole. The French bank has benefitted from increasing its trade finance business and optimising its own capital consumption.
Deal: Pertamina loan – commodity financing
Pertamina eyes upstream assets with corporate financing
MLAs: BTMU, Bank of East Asia, SMBC, BNP Paribas, ANZ, DBS, Mizuho, Credit Agricole, HSBC, Natixis, RBS, Standard Chartered
Amount: $1.747 billion
Tenor: 5 years
Lawyers: Milbank, Latham & Watkins
Indonesian state-owned oil and gas company Pertamina signed a two-tranche, five-year, $1.8 billion corporate loan in December 2014. Priced all-in at 160 basis points (bp) over Libor, the deal highlights the company’s commitment to upgrading and expanding Indonesia’s oil and gas sector under the new central government.
President Joko Widodo’s government has pledged to focus on upstream assets and infrastructure considered critical to the country. Despite weaker pricing, lenders flocked to the deal and made it one of Asia’s largest corporate facilities in the oil and gas sector last year.
Pertamina has built up positive relationships with international banks and further financings are expected throughout 2015.
Indonesia remains an oil and gas hub for Asia and Pertamina’s strategy over the next five years is to invest in more upstream assets as well as upgrading its existing six refineries. Increasing consumption of petroleum products and a growing population make Indonesian borrowers top priority for banks active in Southeast Asia.
The loan was split into an onshore and offshore facility. The $500 millin onshore facility was priced at 140bp. The $1.3 billion offshore tranche was roughly 10bp less. The Bank of Tokyo-Mitsubishi UFJ, SMBC and the Bank of Central Asia were appointed mandated lead arrangers and bookrunners on the onshore facility. The remaining nine banks appeared on the offshore tranche.
Pertamina opted to split the loan for tax and regulation-related purposes. The onshore tranche enabled the borrower to maximise local liquidity in the hope of drawing in local lenders during syndication. The onshore facility does not require government approval as they do not affect the country’s offshore borrowing limit. Indonesia has a quota that caps how much debt the country’s borrowers can raise via offshore lending.
Deal: Reliance Industries – ECA-backed finance
Reliance inks maiden JBIC/NEXI deal
MLAs: BTMU, SMBC, Mizuho
Lenders: Gunma Bank, Hachijuni Bank, Chiba Bank, Chugoku Bank, Joyo Bank, Hyakujishi Bank
Borrower: Reliance Industries
Amount: $550 million
Tenor: 12 years and 4 months
ECAs: JBIC, NEXI
Lawyers: Clifford Chance Tokyo
India’s Reliance Industries signed a 12-year and four month $550 million loan with the Japan Bank for International Cooperation (JBIC) and a series of lenders. Regional Japanese lenders benefitted from a 95% guarantee by Nippon Export and Insurance Investment (NEXI).
The financing consists of a $330 million direct loan from JBIC and a $220 million loan from Japanese commercial banks. Proceeds will partly finance the proposed expansion of Reliance’s petrochemicals plants and the construction of a new gasification plant and refinery off-gas cracker.
JBIC and Reliance have achieved multiple milestones in signing this transaction. JBIC has given Reliance a Better than Sovereign rating, which resulted in a lower premium that what is normally applicable to sovereign-rated borrowers. It is also the largest buyer’s credit deal facilitated by JBIC and NEXI to date.
Up to 20 Japanese small and medium-sized exporters will be mandated to export goods and services to Reliance. Many of these businesses are working with JBIC and NEXI for the first time. This facility can also be used to finance up to 30% of commitments with Indian suppliers not linked with the Japanese suppliers, another first for JBIC.
JBIC’s extended priority repayment facility ensured that Reliance was successful in obtaining participation from smaller Japanese regional banks. Under NEXI’s new insurance programme, the credit insurer was able to secure support from six regional banks, with many of them working with an Indian corporate for the first time.
Reliance has been successful in accessing carious financing markets, illustrating its healthy credit rating of better than sovereign in international debt markets. It has conducted export credit facilities, bonds and syndicated loans. The company has tied up approximately $7.55 billion in export credit agency-backed deals in the last three years.
Reliance Jio Infocomm – ECA-backed finance
Reliance throws its hat into telecoms
MLAs: HSBC, ANZ, Santander, BTMU, BNP Paribas, Credit Agricole, Commerzbank, ING, JP Morgan, Mizuho, SMBC, NongHyup Bank
Borrower: Reliance Jio Infocomm
Amount: $750 million
Tenor: 12 years
Lawyers: Milbank, Juris Corp, Advocates & Solicitors, Bae, Kim & Lee
Exporter: Samsung Electronics
Reliance Industries, through its subsidiary Reliance Jio Infocomm (RJIL) successfully signed the first part of a $1.5 billion export credit agency (ECA) financing. The $750 million deal featured 12 banks alongside the Export-Import Bank of Korea (Kexim). This deal signifies the parent company’s first financing venture into the telecommunications industry.
Leveraging the expertise of international banks fn Kexim, RJIL has secured telecommunications goods and services from South Korea’s Samsung Electronics. The company will obtain technology and expertise from Samsung in order to compete in India’s growing 4G mobile telecoms market.
There were several milestones achieved in signing this transaction. It is Kexim’s first and largest long-term telecom equipment and services financing globally and the largest by a Korean ECA. It is also the largest deal Kexim has conducted in India as well as Reliance’s first with a Korean ECA. The 12-year tenor is the longest among all global ECAs involved in the telecoms industry. In the last decade most tenors have been approximately seven to eight years.
RJIL’s commitment to working with Samsung also enabled Kexim to give the company a rating better than sovereign. The deal featured a lower premium than what is normally applicable to sovereign-rated borrowers. Kexim also supported the Indian rupee-denominated supply contract with Samsung India Electronics, a subsidiary of Samsung Electronics. In this context, Samsung imports were invoiced in local currency and it was classified as eligible Korean content.
Through Kexim’s participation, the $750 million facility can be used to finance up to 30% of the eligible Korean content on goods manufactured and/or services provided by Samsung India.
Reliance Industries has been an active player in ECA-backed finance, so it was no surprise when 12 lenders were mandated on the deal. RJIL’s second tranche is due to sign early in 2015 and the majority of these banks are likely to return. The Reliance Group has tied up $7.55 billion from 13 ECAs in the last three years.
Deal: Reliance Industries – ECA-backed financing
Reliance achieves three-ECA-strong umbrella loan
MLAs: KfW IPEX-Bank, ING, DZ Bank, BTMU, HSBC
Borrower: Reliance Industries
Amount: Eu175 million ($203 million)
Tenor: 12 years and 4 months
Lawyers: Milbank, Juris Corp, Advocates & Solicitors
Reliance Industries has continued to secure a wealth of export credit agency (ECA) led finance in order to secure the growth of its petrochemical refineries throughout India. This deal highlights the Indian conglomerate’s first deal with European ECAs OeKB, Ducroire and SERV.
Signed in May 2014, the three ECA-backed facilities were grouped in one umbrella loan agreement, another first Reliance’s ECA portfolio. SERV supported a Eu78 million facility, OeKB committed a Eu53 million portion and Ducroire rounded out the umbrella loan with a Eu44 million facility. The ECAs also received a lower premium than what is normally applicable to sovereign-rated borrowers.
This facility can be used to finance up to 30% of commitments with Indian suppliers not linked to exporters from Austria, Switzerland and Belgium. The three ECAs will be able to cover future supply contracts with exporters from their respective countries and build on a positive relationship with Reliance Industries.
Proceeds from this deal will finance the expansion and manufacturing capacity for Reliance’s new gasification plant and refinery off-gas cracker plant. It can also extend the proceeds to other manufacturing facilities in Jamnagar, Hazira, Silvassa and Dahej.
Reliance’s ECA-backed transactions are always likely to attract a global group of lenders owing to the company’s strong credit rating. This deal was no exception as it attracted lenders from both Europe and Asia.
The company has tied up $7.55 billion in ECA-backed finance from 13 ECAs in the last three years. It maintains the largest number of active ECA relationships globally for any corporate and tied up $1.3 billion in financing in 2014 alone. It also coordinated maiden deals with six ECAs in 2014.
Deal: Roy Hill – ECA-backed project financing
Banks and ECAs seal world’s largest green-field project financing
MLAs: NAB, BNP Paribas, CBA, Westpac, ANZ, BTMU, SMBC, Mizuho, HSBC, ING, OCBC, Societe Generale, Natixis, Sumitomo Mitsui Trust Holdings, Caterpillar Financial Services
Public Finance Institutions: Bank of China, ICBC, Korea Finance Corporation, China Construction Bank
Borrower: Roy Hill Holdings
Amount: $7.6 billion
Tenor: 10.5 years
ECAs: Kexim, K-Sure, US Ex-Im, JBIC, NEXI
Lawyers: Allen & Overy, Latham & Watkins, Herbert Smith Freehills
The $7.6 billion Western Australia-based Roy Hill iron ore mine signed in March 2014 with 19 financial institutions, multiple structures and five export credit agencies (ECAs). The project financing is a low-cost integrated open pit iron ore mine and features a wet processing plant, a 344km heavy-haul railway, port facilities and two new berths located at Port Hedland. Once fully operational, the iron ore mine will export up to 55 million tonnes of product per annum.
The project sponsors – Hancock Prospecting, Marubeni Corporation, POSCO and China Steel Corporation – secured the financing from a large group of international lenders. Marubeni, POSCO and China Steel are offtakers for approximately 50% of the product. With such offtake contracts in place, the sponsors were able to seal the following tranches from ECAs:
- $900 million from JBIC
- $592 million from US Ex-Im
- $592 million from Kexim
The deal also secured a $700 million facility backed by Nippon Export and Investment Insurance and a $1.2 billion Korea Trade and Insurance Corporation tranche. With such strong ECA support, project sponsors obtained a 10.5-year tenor in order to support the majority of the mine’s life. Roy Hill has a 14-year mine life.
In addition to ECA facilities, Roy Hill’s project financing includes a RMB 60 million loan, the first of its kind to a non-Chinese borrower in Australia. There is also an FX option premium facility worth $200 million, a $200 million letter of credit portion and a working capital facility worth Au$273 million ($224 million). Remaining debt saw 19 banks commit to a $2.5 billion term loan.
Roy Hill also contains a strong support package. All sponsors’ equity was contributed prior to first drawdown and the project was over 40% complete by the time of drawdown. Despite a difficult macro environment for iron ore prices, financing was completed in less than 18 months from the initial debt launch.
Deal: Sarulla – ECA-backed project financing
Indonesia looks to renewable investments
MLAs: Societe Generale, BTMU, ING, Mizuho, NAB, SMBC
Borrower: Project sponsors – Ormat, Kyushu, Itochu and Medco
Amount: $1.17 billion
Tenor: 20 years
Other lenders: ADB, Canadian Climate Fund for Private Sector Investment
Lawyers: Milbank, Latham & Watkins
The Sarulla geothermal power project involves the development of a 330 megawatt project in Northern Sumatra, Indonesia. It will roll-out in three phases at 110mw each. The first phase is due to come online in 2016; the second and third will go live in 2017 and 2018 respectively. State-owned power distributor Perusahaan Listrik Negara (PLN) is the offtaker, under a 30-year energy sales contract (ESC). The ESC is priced at $0.0679/kwh.
The central government is guaranteeing PLN’s obligations under the project’s ESC and will use its business viability guarantee letter. Sarulla’s developing geothermal resources will be covered under the ESC. Pertamina Geothermal Energy owns this concession and the sale of power to PLN.
Meanwhile the group of commercial lenders will be able to draw on the guarantee from the Japan Bank for International Cooperation (JBIC) in the event that the government does not stand behind the letter.
The $1.17 billion financing features a $250 million loan from the Asian Development Bank (ADB) as well as an ADB-administered $80 million mezzanine tranche on behalf of the Clean Technology Fund. The Canadian Climate Fund for Private Sector Investment has also provided a $20 million mezzanine loan. JBIC has committed $490 million and covered $330 million in commercial debt from six banks. This is rounded off in $350 million in equity and $80 million pre-operating revenue from the project sponsors.
Indonesia is the world’s third-largest carbon dioxide omitter and this deal highlights the country’s efforts to stern omissions and invest in renewable energy. Geothermal energy is projected to contribute roughly 12% to the country’s energy mix by 2025 under the National Fast Track II programme.
Sarulla will also help Indonesia mitigate electricity shortages, satisfy future needs of an undersupplied market and reduce dependency on imported fuels. It is the first green-field geothermal power project in Indonesia and incorporates a multi-borrower structure via an unincorporated joint venture.
Deal: Shahjibazar power project – ECA-backed infrastructure financing
Sinosure completed first Bangladeshi power deal
Borrower: Bangladesh Power Development Board
Amount: $257 million
Tenor: 13 years
ECAs: Sinosure, China Ex-Im
Lawyer: Norton Rose Fulbright
The Bangladesh Power Development Board (BPDB) sealed a landmark financing agreement with lenders in support of the 330 megawatt Shahjibazar power project. The BPDB signed a 13-year $257 million loan deal that was coordinated by HSBC. The transaction saw strong appetite from lenders and ICBC joined the deal with 55% in debt and the Export-Import Bank of China (China Ex-Im) chipped in with 35%.
The total project investment came in at $338 million and remains of strategic importance to Bangladesh in order to address the country’s power shortages. New cost-competitive gas plants like Shahjibazar and Ashuganj are aimed at providing the country with a higher power efficiency.
HSBC acted as facility agent and security agent for the $257 million Sinosure-backed facility and the project as a whole comes with a full recourse to the BPDB. It also benefits from a structure incorporating a full guarantee from Bangladesh’s Ministry of Finance.
Longer tenor financing comes with a three-year availability period and a further ten years in repayments, which is the longest tenor achieved by the BPDB. Project costs were financed by up to 85% by the Sinosure covered facility and HSBC and ICBC both benefit from 95% political and commercial risk covers by Sinosure. Such insurance is important in emerging Asian markets such as Bangladesh. Our Deals of the Year panel was particularly impressed by the success of the deal in a market that Euromoney Country Risk ranks among the most difficult to finance anywhere.
For the state-owned BPDB, this is its first ECA-covered facility. They will remain responsible for planning, constructing and operating the power generation plant. Signed in March 2014, this is Sinosure’s first covered tranche in Bangladesh.
Bangladesh’s government see export finance as a viable and competitive source of future funding. The state-owned entities are also keen to use export credit agencies’ lending capabilities – especially across power and infrastructure.
Deal: Tangsteel – Steel prepayment facility
Tangsteel returns with record-breaking prepayment
MLABs: Deutsche Bank, ABN Amro, BNP Paribas, DBS, HSBC, ING, Natixis, Rabobank, UOB, Standard Chartered, Societe Generale
MLAs: NAB, ICICI Bank, Westpac, Credit Suisse, RZB, ICBC
Lead arrangers: Chang Hwa Bank, DZ Bank, Zurcher Kantonalbank, BHF-Bank, Taiwan Cooperative Bank
Borrower: Sinobiz Platforms (Tangsteel’s offshore platform)
Amount: $1.5 billion
Tenor: 2 years
Pricing: 275 basis points over Libor
Lawyers: Norton Rose Fulbright
Exporter: Tangshan Iron & Steel Group (Tangsteel)
Deutsche Bank has returned as the mandated lead arranger and bookrunner (MLAB) on the two-year $1.5 billion steel prepayment facility – the largest structured commodity trade financing ever completed by a Chinese company. It is the fourth consecutive prepayment financing for steel exports to Duferco, exceeding last year’s $800 million prepayment. Duferco S.A is a Swiss-headquartered company that distributes steel products and raw materials to various destinations around the world.
Facilitated through the company’s Hong Kong-based trading platform Sinobiz Holdings, the deal comes with a tight security package. It includes an assignment of commercial contracts and charges over the sales collection amount. It also includes the Bank of China’s advance payment guarantee, which covers 100% of the prepayment. Its secure structure was enough to attract 22 international banks to the deal at varied ticket sizes.
Tangsteel has managed to maintain a two-year tenor on the transaction, mirroring the maturity from last year. For a deal in its fourth cycle banks’ appetite for this transaction has not waned, as the prepayment has closed oversubscribed. Increased lending commitments for each transaction enabled the company to maintain a longer maturity.
This year’s prepayment has attracted 11 MLABs alongside six MLAs and five lead arrangers, whereas the company’s previous $800 million two-year prepayment mandated 10 banks at MLAB level. Deutsche Bank led the group as security agent and publicity bank while ABN Amro was the documentary letter of credit handling bank. Norton Rose Fulbright returned to advise the lenders on the deal.
Tangsteel is a key asset of China’s Hebei Iron & Steel Group, which is listed on the Shenzhen Stock Exchange. It is China’s leading steel company. It accounted for approximately 45% of Hebei Iron & Steel’s total sales in the last financial year.
Deal: Turkmengas petrochemicals plant – ECA-backed infrastructure
TVEB attracts Asian ECA support
MLAs: Industrial Bank of Korea, Hana Bank, NongHyup Bank, Shinhan Bank, Woori Bank, Deutsche Bank, SMBC, BTMU, Commerzbank, ICBC, Intesa Sanpaolo, Korea Exchange Bank, Mizuho, Societe Generale, UniCredit, Credit Suisse, Bayer Landesbank, Kookmin Bank, DZ Bank, KEB Asia Finance
Borrower: Government of Turkmenistan
Amount: $2.5 billion
Tenor: 10 years
ECAs: Kexim, K-Sure, JBIC, NEXI
Lawyers: Allen & Overy, Kim & Chang, Medet
Exporters: LG International, Hyundai Engineering & Construction, Toyo Engineering Corporation
Turkmenistan’s central government, acting through the State Bank of Foreign Economic Affairs (TVEB) has sealed a landmark $2.537 billion export financing. It incorporated support from the Export-Import Bank of Korea (Kexim), Korea Trade and Insurance Corporation (K-Sure), the Japan Bank for International Cooperation (JBIC) and Nippon Export and Insurance Investment (NEXI).
In selecting this award, Trade Finance noted that Euromoney Country Risk ranks Turkmenistan among the most difficult to finance markets worldwide. But Turkmenistan’s economy has grown in excess of 10% over the last five years mainly due to its natural gas exports to China.
The large-scale financing with a global group of lenders was secured with a 10-year tenor door-to-door. Kexim has committed a direct loan of $492 million as well as a $214.9 million guaranteed loan facility. K-Sure has guaranteed a $1.1 billion tranche.
From Japan, JBIC’s direct facility came to $438.2 million while NEXI covered a $292.1 million portion. Commercial banks from South Korea, Japan, Germany, Italy, China, France and Switzerland comprised the NEXI, Kexim and K-Sure covered debt—a diverse group illustrating the syndication skills of the MLAs.
Turkmengas acted as a sub-borrower on this transaction and has secured export contracts with a series of corporates from South Korea and Japan. The exporters comprise a consortium of LG International, Hyundai Engineering, Hyundai Engineering and Construction and Toyo Engineering Corporation. They will provide equipment for the construction of a gas plant.
Deal: Vinh Tan 4 – ECA-backed power project
Vietnam Electricity closes its largest ECA transaction
MLAs: HSBC, DBS, Societe Generale, Standard Chartered, SMBC
Borrower: Vietnam Electricity Corporation
Amount: $1.8 billion
Tenor: 16 years and 3 months
ECAs: Kexim, JBIC, K-Sure
Vietnam Electricity Group (EVN) signed a multi-tranche export credit agency
(ECA) deal in support of the Vinh Tan 4 supercritical thermal coal-fired power project. The project includes a total investment of $1.8 billion composed of debt from ECAs and commercial banks. This is one of the largest EVN investments to date.
The project is of strategic importance for Vietnam as it is part of the National Electricity Development Plan for 2011 to 2020. This plan aims to ensure the sufficient supply of electricity for socioeconomic development. The project comes with full recourse to EVN and features the added benefit of a full guarantee from Vietnam’s Ministry of Finance.
EVN was able to obtain the longest tenor possible. The 16 year and three month tenor was as an important factor in the financing and this enabled the company to obtain strong support from the Export-Import Bank of Korea (Kexim), the Japan Bank for International Cooperation (JBIC) and Korea Trade and Insurance Corporation (K-Sure).
Kexim has provided a $300 million loan and covered a commercial tranche worth $155 million. JBIC has directly lent $338 million and K-Sure has provided cover on a $455 million tranche.
Commercial banks on the deal benefit from 100% political and commercial risk cover from Kexim and K-Sure.
The EPC contractor comprises a consortium of companies from Japan and South Korea. The companies are Doosan Heavy Industries, Mitsubishi Corporation, Pacific Corporation and Power Engineering Consulting.
EVN is 100% owned by the Vietnamese central government. It estimates that Vietnam will require 75,000 megawatts of installed electricity capacity by 2020 and Vinh Tan 4 takes the company 1200 megawatts closer to its goal. EVN has confirmed its willingness to support ECA-backed finance to support future power projects, which will eventually include the expansion of Vinh Tan 4.
Deal: Viva Energy – Commodity Financing
Vitol-led financing signs in tight timeframe
MLAs: ANZ, Bank of America Merrill Lynch, BNP Paribas, BTMU, Citi, Deutsche Bank, DBS, First Gulf Bank, HSBC, Mizuho, NAB, National Bnak of Abu Dhabi, Natixis, OCBC, Societe Generale, Standard Chartered, SMCB, UOB
Borrower: Viva Energy Holdings
Amount: $2.05 billion
Tenor: 5 years = 2 years
Lawyers: Gilbert + Tobin, Ashurst
Viva Energy Holdings incorporated of Shell Australia, Shell Company of Australia, Shell Refining and Shell Gas completed a two-tranche $2.05 billion term facility and borrowing base facility in July 2014. Led by Vitol Asia, this deal proved to be the landmark commodity financing for an independent oil trader in Australia. It made Vitol the largest independent oil trader operating in the country, surpassing Puma Energy according to a spokesperson from Natixis.
The transaction enabled Vitol Asia to acquire Shell’s Australian refinery and downstream business. It snapped up Shell’s oil refinery in Geelong, Victoria along with its 870-strong retail business. Vitol has also acquired the brand licensing from Shell and exclusive distributor rights for the Shell Lubricants business.
It was completed at a time when Australia’s refinery sector faced significant profit margin deterioration from larger, more competitive Asian refineries. It also came after there were closures to a number of Australian refineries from rivals such as Caltex and Mobil.
Split into two tranches, the first portion is a five-year $750 million secured syndicated facility and the second tranche is a two-year $1.3 billion borrowing base syndication. Depreciating oil prices should strengthen Vitol’s push into the market by enhancing its profitability. This transaction in particular was completed within a very tight timeframe and included an equity injection from Vitol and the shareholders. Vitol’s strong balance sheet and relationships with global banks saw the deal close oversubscribed.
ANZ and the National Bank of Abu Dhabi coordinated the loan. The $750 million tranche was priced at 300 basis points (bp) over dollar Libor, a loans banker on the deal said, while the $1.3 billion portion was priced at 175bp over Libor.