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An international syndicate of banks have arranged a US$385mn structured copper pre-delivery loan for Fangyuan Group, the fourth-largest copper producer in China.

This was the first offshore syndication raised by the group and it follows a US$145mn facility raised in 2015.

The lead arrangers were Deutsche Bank and ING and while the terms of the finance are confidential, Frank Wu, the regional head of structured commodity trade finance at Deutsche, says that they “have all the classic elements of a structured commodity trade finance (SCTF) loan, such as ring-fenced self-liquidating cashflow from the underlying commodity offtake”.

He continues: “The pricing is in line with what the market would expect for this kind of counterparty and deal structure. The oversubscription shows that there is good market appetite for good SCTF deals.”

This market appetite has returned with the upturn in commodity prices through Q2, Wu tells GTR. The deal was 54% oversubscribed, with Wu also alluding to but not providing detail of another SCTF deal closed recently that was 50% oversubscribed.

There were 11 banks involved in the syndication, and GTR can reveal them to be: Deutsche Bank, ING, Société Générale, ABN Amro, China CITIC Bank, First Gulf Bank, Korea Development Bank, Nanyang Commercial Bank, SMBC, ICICI and Banca Monte dei Paschi di Siena.

Since Chinese companies like Fangyuan are generally not allowed to borrow foreign funds as non-foreign invested enterprises, the banks had to leverage the external debt quota approved by the State Administration of Foreign Exchange (Safe – the Chinese foreign exchange regulator) under a cross-border cash pooling scheme.

These sorts of structures were uncommon in China until quite recently, but with the growth of international banks in the country, particularly in the base metal, they have been used more frequently.

Momchil Ivanov, who heads ING’s structured metals and energy finance team in Asia, says: “Despite the challenging commodity market environment, Fangyuan Group is still one of the lowest-cost producers of copper worldwide. The overwhelming success of this syndication is a testament not only to the strong financial standing and professionalism of the group, but also to the sector expertise and market knowledge of the two arrangers.”