GTR is proud to reveal the winning transactions for Best Deals 2011. The deals reflect the growing diversity of the trade, supply chain and export finance markets.
This year we whittled down the hundreds of nominations to under 30 winning deals. It was a decision taken during last year’s deal selection process that we would reduce the number of deals in order to lend more prestige to the honour of winning an award.
Our selection of deals reflects current market trends. One of our winning deals was the Barzan Gas project in Qatar, which according to Dealogic data was the largest trade finance loan signed in 2011.
The oil and gas sector was also the largest recipient of trade finance in 2011, and our deal choices reflect this trend, with prizes going to oil and gas deals in Ghana, Brazil, Australia as well as in Qatar.
More unusual industry sectors are also beginning to attract trade and export financing, with satellite financing deals scooping awards for the first time.
Full list of winners 2011
Banks rush to Qatar petroleum
Borrower: Qatar Petroleum
Amount: US$10.3bn (US$7.25bn commercial debt)
Financial advisor: RBS
Mandated lead arrangers: Al Khalij Commercial Bank, ANZ, Apicorp, Bank of America, Barclays Capital, BTMU, Citi,
Commercial Bank of Qatar (CBQ), DnB NOR, Doha Bank, HSBC, International Bank of Qatar (IBQ), JP Morgan Chase, KfW-IPEX, Mizuho, National Bank of Abu Dhabi (NBAD), Qatar National Bank, RBS, Riyadh Bank, Samba Financial Group, Siemens Financial Services, SMBC, Standard Chartered, Union Bank of Qatar
Participating banks for the Islamic debt tranche: Barwa Bank, Crédit Suisse, Masraf Al Rayan, Qatar International
Islamic Bank (QIIB), Qatar Islamic Bank (QIB), WestLB
ECAs: JBIC, Kexim, Nexi, Sace
Law firms: Allen & Overy; Arps; Meagher & Flom; Slate; White & Case Skadden
Tenor: 16 years
Date signed: December 2011
Qatar Petroleum closed the world’s largest project financing in 2011, with a US$10.3bn facility to fund the Barzan gas project in Qatar. The deal marks Qatar’s most expensive project in the last five years, as well as its largest international syndicated loan in three years.
Commenting on the deal, Meshaal Al-Mahmoud, Qatar Petroleum manager, project finance, says: “The strength of the state of Qatar credit, the unique financing structure that was tailored to fit the project nature, and the relationship with global and regional banks were the main success factors behind this transaction.”
A syndicate of over 30 banks and export credit agencies (ECAs) participated in the commercial debt tranche of the transaction which comprised an offshore and onshore element, transporting gas from Qatar’s north field to a processing facility in Ras Laffan Industrial city.
The total project financing totals US$10.3bn – US$7.25, or 70% of which is debt while the remaining 30% is equity.
The commercial debt loan comprises a commercial bank facility of US$3.34bn, a US$850mn Islamic facility and US$1.21bn tranche provided by banks and covered by ECAs. The total ECA commitments to the transaction are US$2.55bn via both guarantees and direct funding.
A total of US$600mn of the ECA financing was provided by Japan Bank for International Cooperation (JBIC), and is insured by Nippon Export and Investment Insurance. Kexim provided a US$700mn direct loan and a US$300mn guarantee, while
Italy’s ECA Sace insured US$355mn in support of the deal’s Italian contracts, which include Nuovo Pignone and Cameron Italy.
ExxonMobil provided a US$507mn co-loan.
All of the debt will mature over a 16-year tenor, with pricing on the uncovered commercial bank tranche breaking down as follows: 130 basis points (bps) pre-completion, 175 bps post-completion through to year eight, 190 bps from year nine through to 12, and 200 bps for the remaining three years.
The Islamic tranche follows the same pricing, but is packaged differently. The Kexim-covered tranche is priced at 130 bps pre-completion and 170 bps thereafter, while the Sace-covered tranche is 130 bps pre-completion and 150 bps following that. The Nexi-covered tranche is 130 bps all the way through.
Philip Stopford, partner and head of White & Case’s energy, infrastructure, project and asset finance practice in Western Europe, the Middle East and Africa, says: “The abundance of natural resources, combined with the region’s sustained strong economic growth, makes Qatar an attractive prospect for investors. The transaction demonstrates the strength of our practice across the region and our success in working with clients to close big-ticket transactions involving multiple funding sources.”
The Barzan gas project bridges the gap between Qatar’s increasing domestic demand and its limited supply of energy. Once completed the project is expected to produce 1.4 billion cubic feet of gas a day. It also taps into resources estimated to represent 14% of the world’s natural gas reserves.
Post-revolution Tunisia opens up for business
Borrower: Compagnie Tunisienne de Navigation
Mandated lead arrangers: BNP Paribas, Société Générale
Law firms: Allen & Overy Paris; Jurismed Tunis (lenders)
Tenor: 13 years
Date signed: July 18, 2011
In mid-July last year Société Générale and BNP Paribas closed a 13-year €156mn buyer credit loan in favour of Compagnie Tunisienne de Navigation (CTN), a Tunisian public shipping transportation company.
The financing supports the purchase of one large ferry boat that will link Tunisia to European countries, mainly France and Italy. It was built by the Korean shipyard Daewoo Shipbuilding Marine Engineering and is said to be the largest ferry ever built to-date. It has a 12-month availability period and 12-year repayment period to finance 80% of the car ferry purchase.
The transaction was covered by the insurance arm of the World Bank, the Multilateral Investment Guarantee Agency (Miga).
The deal represents an important milestone for Tunisia following the political upheaval and departure of the former President Ben Ali in early 2011. CTN issued the mandate before the uprisings, but following the Jasmine revolution in January 2011, an undisclosed ECA involved in the original deal postponed its planned involvement.
However, despite the turmoil, the ferry company could not delay the purchase of the Korean ship and therefore had to look
for alternative financing options. This led to Miga stepping in and the successful closing of the deal in July.
Miga had confirmed its strong support to Tunisia after the revolution by implementing a number of medium and long-term financings. The group had also worked with the transitional authorities and then the newly-elected government to determine future strategic directions.
“In this respect, and considering that no other political insurance was available, we considered that asking for Miga’s support to this project would be consistent with World Bank Group’s strategy for Tunisia,” says Marie-Noëlle Rondeaux, export finance, BNP Paribas.
Rabah Rahmani, director, Africa Middle East, export finance, Société Générale, comments on the financing: “It heralds the reopening of Tunisia’s economy to foreign investment and testifies to the confidence of international financial institutions in the country.”
Valérie Mace, director, multisource, export finance, Société Générale adds: “We are delighted that this emblematic deal for Tunisia gets a GTR 2011 Best Deal award. This recognises the strong efforts made by BNP Paribas and Société Générale to structure in a challenging political environment, with the help of the multilateral institution Miga, a viable financing solution to support a strategic project for Tunisia.”
BNP Paribas’ Rondeaux adds: “The ability to secure this financing despite the events was an achievement that demonstrated the existing commitment of the MLAs to Tunisia. This transaction will certainly contribute to reinforce our presence in this country.”
From Miga’s perspective it was a landmark deal as it is the first transaction the insurer has covered in the shipping sector. It is also one of the first transactions that made use of its new product that covers the non-honouring of sovereign financial obligations.
It also demonstrates Miga’s aim of encouraging foreign investment in the Middle East and North Africa. The agency announced in February 2011 that it would mobilise US$1bn in insurance capacity for the region.
Asides from the Miga support, risks inherent in this transaction were further mitigated by the fact that the vessel is a
strategic asset for Tunisia.
The ferry will play an important role in supporting the post-revolution Tunisian economy as it will help transport both freight and Tunisian commuters back and forth between Europe and Tunisia. The ferry is capable of carrying around 3,200 passengers and 1,060 cars.
Despite the success of this deal, the economic outlook for Tunisia remains relatively negative.
At the end of February this year, Fitch Ratings reaffirmed the country’s ratings, with Tunisia’s long-term foreign currency issuer default rating staying at BBB- and its long-term local currency issuer default rating at BBB. The outlook remains negative.
In a statement released by Fitch, it said: ”The affirmation of Tunisia’s sovereign ratings reflects the relatively smooth political transition from the former Ben Ali regime to a newly-elected interim government, notwithstanding the impact of instability in neighbouring Libya.
“However, the economy has performed worse that expected, raising concerns about public and external debt sustainability in the context of a more uncertain global economic backdrop.”
Colombian refinery scoops ECA support
Borrower: Refineria de Cartagena
Mandated lead arrangers: BBVA, BNP Paribas (financial advisor and US Ex-Im facility agent), BTMU, HSBC, SMBC
ECAs: EKN, Sace, US Exim
Law firms: Cardenas & Cardenas; Linklaters; Milbank
Tenor: 16 years
Date signed: December 30, 2011
At the end of 2011, BNP Paribas, BBVA, BTMU, HSBC and SMBC signed a US$3.5bn project finance facility in support of the expansion of the existing Refineria de Cartagena (Reficar) Colombia.
Total investment in the project is US$5bn with EcoPetrol, Reficar’s parent company, committing US$1.5bn in equity.
The facility received significant support from a number of ECAs and is the first multi-ECA deal to close in the Colombian market.
It is also one of the largest project financings to date in Latin America and will lead to the development of the third largest refinery in the Caribbean region. It features the second largest US Exim direct loan to date.
“This is a breakthrough transaction in Colombia,” remarks Daniel Minzer, vice-president in the export and agency group at SMBC.
“The Reficar financing is the largest and longest-tenor structured finance transaction ever done in the country. It was also the only project finance deal closed in the market in 2011. The closing of this financing confirms investors’ appetite for the Colombian market assuming the right structure is in place. The transaction opens up the door for other long-term project finance transactions in the country alongside ECAs and multilateral agencies.”
Trevor Udell, director, HSBC project and export finance, adds: ”This landmark transaction provided Reficar with the long-term financing required for project cash flows despite challenging market conditions.”
There were a number of factors that encouraged banks to participate in this transaction, including the investment grade granted to Colombia in May last year as well as the complex structure of the deal. The facility features a performance guarantee from the sponsor EcoPetrol which guarantees completion of the project and repayment of the debt. This guarantee differs from others where the guarantor makes payment after a default occurs.
In contrast, this guarantee permits Ecopetrol to pre-empt any event of default in a number of ways. It can provide Reficar with funds by means of equity contributions or subordinated loans to complete the project, or provide Reficar funds to make debt service payments or assume Reficar’s debt before a default event occurs.
The collateral structure also provided lenders with greater comfort in that it granted them a security interest in the project bank accounts. Under this structure, all of Reficar’s offshore accounts will be subject to escrow arrangements and security interest under New York law.
SMBC’s Minzer elaborates on the appeal of the deal: “This was one of the few opportunities banks have had to lend money to Ecopetrol or one of its subsidiaries. Banks with pent-up appetite for Ecopetrol or Reficar and Colombia took the opportunity to participate in this transaction.
The participation of ECAs and a well-designed structure added to the interest generated by the transaction.” The transaction will also have considerable impact on the development of the Colombian economy as a whole.
“The expansion and modernisation of the Refineria de Cartagena has brought a sizeable amount of investment that will positively impact not only the company but also the regional economy of Cartagena. Without a doubt this is the largest foreign investment in the history of the city of Cartagena bringing more than 5,000 jobs during construction and improving the consumption of raw materials and services throughout the city,” comments Mauricio Paz, head of structured trade finance, Colombia, BBVA.
The deal comprises a 16-year US$2.65bn US Exim direct loan and a 14.5-year US$440mn commercial facility. The ECA tranches all carry tenors of 16 years and comprise a US$201mn tranche backed by the Italian ECA Sace; a US$100mn portion guaranteed by US Exim and a US$100m facility backed by Swedish ECA EKN.
The deal will support the import of equipment from Chicago Bridge & iron, Foster Wheeler
The financing will ensure the capacity of the existing refinery will increase from 80,000 barrels per day (bpd) to 150,000 bpd.
Lights on in Tanzania
Borrower: Ministry of finance, United Republic of Tanzania
Sole arranger: HSBC
ECAs: ATI, EKN, Giek
Law firms: Advokatfirmaet Haavind; CRB Africa Legal; White & Case
Tenor: 13 years
Date signed: April 2011
Multilateral-led trade schemes continue to support the trade finance market.
HSBC was sole arranger on a US$103.7mn export credit agency (ECA)-backed facility closed in April 2011 in support of the construction of a 100MW gas-fired power plant in the Ubungo region of Dar es Salaam, Tanzania’s largest city and economic hub.
The facility was backed by the Norwegian ECA Giek, with partial reinsurance from the Swedish ECA, EKN and the African
Trade Insurance Agency (ATI). It financed 85% of the contract for the power plant.
The main contractor in the deal was Norwegian firm Jacobsen Elektro, with Siemens Industrial Turbomachinery in Sweden providing the gas turbines. The Tanzania Electric Supply Company imported the equipment.
Law firms White & Case, CRB Africa Legal and Advokatfirmaet Haavind provided legal counsel to the lenders working on the deal.
The construction of the plant is well underway and iS scheduled to be commissioned by April 2012.
The deal is a landmark transaction for Tanzania in that it is the first non-concessional financing concluded by the government of Tanzania following the establishment of a US$1.5bn limit for that purpose with the IMF in May 2010. Before that agreement the government had not been able to borrow non-concessionally for over a decade.
The transaction is the largest ECA-supported loan into Tanzania for many years and is the largest Giek-supported facility into Sub-Saharan Africa to-date.
According to HSBC, it only took two months from mandate to getting the loan signed and then only a further one month to commence drawdowns. This is a significant achievement considering the pioneering nature of the transaction.
It is expected that the deal will open up further opportunities for ECA-backed financing into Tanzania, and will set a benchmark against which the government will evaluate future financing options.
HSBC has already arranged a further €61mn loan guaranteed by Giek in support of a 60MW heavy fuel oil-fired power plant in Mwanza, Tanzania’s second largest city. This transaction was signed in October last year.
Alexei Rybakov, associate director, export finance, at HSBC comments: “ECA-backed financing is an excellent way for governments in Sub-Saharan Africa to raise funding for priority infrastructure projects. With the support of the ECAs, governments can often achieve financing terms otherwise not available on a purely commercial basis.”
“The government of Tanzania considered a number of financing sources for the Ubungo power project and the Giek financing HSBC proposed was deemed to be the most attractive option, both in terms of the tenor achieved and the pricing.”
The project will have a tremendous impact on Tanzania. The country has suffered from severe power outages in the past year due to lower than normal rainfall which consequently reduced the electricity output of the hydroelectric power plants that usually contribute around 90% of the electricity supply.
Continual power cuts have angered the public and have led to threats of strike action by union leaders. The IMF even cut its 2011 growth forecast for Tanzania to 6% from 7.2% in March 2011, stating that regular power cuts would hurt output.
However, there is also much optimism about the future of Tanzania. It has long been regarded as one of the more peaceful African nations, and although the IMF predicts a decline in GDP, it also has stated that growth is likely to rebound in 2012.
With external financing in the form of both grants and loans from multilaterals dwindling since 2008/09, the Tanzanian government has clearly stated its intention to widen its financing sources to non-concessional loans such as syndicated loans, ECA-backed facilities and eurobonds.
Across Africa, governments are facing similar scenarios as donor aid declines. Africa has only received US$11bn of the US$25bn promised in 2005 at the G-8 summit.
Getting Iraq better connected
Borrower: Asiacell Communications
Mandated lead arranger: HSBC
ECA: Euler Hermes
Law firm: Clifford Chance
Tenor: 5 years
Date signed: August 2011
Acting as mandated lead arranger, HSBC closed a US$24mn export credit agency (ECA)-backed facility to finance imports of telecom equipment into Iraq in mid-2011.
The borrower was Asiacell, a leading mobile operator in Iraq, and the equipment was provided by Nokia Siemens Networks (NSN). The German ECA Euler Hermes guaranteed the transaction.
The deal stands out as it is the first ECA-supported financing in Iraq for decades and represents an alternate source of funding for Iraq corporates struggling in a difficult economic and political environment.
“Asiacell needs to continue to invest in upgrading their network throughout Iraq. Given that NSN are one of Asiacell’s main suppliers, ECA-supported financing is an obvious medium-term financing solution and one of the very few financing options available to even top quality Iraqi corporates such as Asiacell,” remarks Simon Lee, director, export finance at HSBC.
It is hoped that this deal will open up new opportunities for further ECA-backed deals into Iraq, and HSBC is well-placed to support such deals.
Lee comments: “HSBC is unique amongst international banks in having a local Iraqi subsidiary in the form of Dar Es Salaam Investment Bank and we are keen to do more ECA supported financings in the country.”
Nokia Siemens Networks entered into a framework contract with Asiacell in 2008 and has since been one of the leading suppliers of telecommunications equipment and systems to Asiacell.
Asiacell was the first mobile telecommunications company to set up in Iraq, established in 1999.
In October 2003, Asiacell was granted a two-year GSM license for seven northern provinces in Iraq. By 2005 this license was extended to cover the entire country.
Azerbaijan funds first satellite
Mandated lead arranger: Société Générale
Sole lender: SMBC Europe
Guarantor: Ministry of finance, Azerbaijan
Law firm: Clifford Chance
Tenor: 12 years (inclusive of construction and repayment)
Date signed: October 7, 2011
This Coface-backed loan agreement supports the acquisition of Azerbaijan’s first geostationary satellite; an important project for the CIS country as it marks its presence in the international market.
Azerbaijan’s national satellite operator Azercosmos will use the financing to partially fund the purchase of an Ariane 5 launch vehicle from French space transportation company Arianespace. Azercosmos is the first national satellite operator in the Caucasus.
Société Générale acted as mandated lead arranger for the facility and SMBC Europe took the role of sole lender, Coface agent and facility agent. The facility is guaranteed by the ministry of finance of Azerbaijan.
“Azercosmos was able to achieve attractive terms despite difficult financial market conditions, thanks to cooperation between the two European banks, which brought together Société Générale’s expertise in Azerbaijan and SMBC’s capacity for funding large amounts at a reasonable cost,” comments Virginie Lenek, vice-president, South Eastern, Central and Western Europe at Société Générale export finance.
The deal confirms Azerbaijan’s interest in ECA-backed financing.
“We are working on several other satellite projects at the moment and expect a constant flow of deals in the foreseeable future,” says Dulmazul Luvsandorj, advisory, ECA and environmental projects at SMBC’s structured finance department. “We are keen to use our strong export finance expertise to support our customers, especially in the emerging market.”
A separate facility was closed for the same project in August last year, and saw Azercosmos raise US$116.6mn from BNP Paribas under a guarantee from US Exim.
Presenting an electronic future
Borrower: Samancor, Switzerland (part of the BHP Billiton group)
Advising and negotiating bank: RBS
Issuing bank: KEB
Third party technology provider: Bolero
Date signed: July 2011
This winning transaction marks the first fully electronic presentation of documents required under a letter of credit issued subject to the eUCP guidelines. The transaction was carried out via the Bolero platform.
The beneficiary of the documentary credit was mining conglomerate BHP Billiton, a company already using Bolero’s multi-bank trade finance service.
The letter of credit was raised by Korean company Tae Kyung via issuing bank Korea Exchange Bank (KEB). RBS was the advising and negotiating bank.
The documents in the epresentation included the commercial invoice, packing list, certificate of weight, certificate of analysis as well as the bill of lading and insurance certificate.
The electronic documents were sent via the Bolero platform and were received by the issuing bank which promptly honoured and paid its obligations.
By sending the documents electronically, the solution helps reduce or make the transaction entirely paperless, which helps the client reduce its days sales outstanding and increase working capital liquidity.
“RBS is delighted to have played a pivotal role in making eUCP a reality for this large exporter,” notes Anand Pande, regional head of products at RBS in Singapore, and recently appointed global head of trade product management.
“This is a significant transaction for the industry, especially in Asia, where there can be frequent delays and inefficiencies in the traditional letter of credit process due to the region’s large geographical area.”
What makes this deal unique and different from other electronic presentation initiatives is that this programme was not restricted to pre-checking of scanned electronic documents or direct examination of documents electronically by the advising bank. In a landmark achievement, this programme has proven that LC presentations can be processed electronically end-to-end from the nominated bank to the issuing bank.
“We are very excited about the leadership taken by this large exporter, its customer, Tae Kyung Industries and two partner banks, RBS and KEB, in proving the capability of true electronic presentation and the eUCP process,” comments Arthur Vonchek, CEO of Bolero.
Bunge selects securitisation programme
Facility agent: Finacity Corporation
Lead agent: Rabobank
Participating banks: BNP Paribas, Crédit Agricole, HSBC, Rabobank
Law firms: Mayer Brown; Reed Smith
Tenor: 5 years
Margin: ABCP + 85 (all-in Libor +115)
Date signed: June 2011
Soft commodities trader Bunge has won US$700mn under a global trade receivables securitisation programme from Rabobank, Crédit Agricole, HSBC and BNP Paribas.
The programme will give Bunge working capital through the continual purchase of receivables and will replace three local securitisations and five factoring facilities in North America and Europe. The primary funding is supported by domestic and cross-border agricultural and food receivables as collateral.
The programme will work on a five-year revolving basis with a price of 85 basis points over asset-backed commercial paper (ABCP).
Mark O’Keefe, Rabobank head of European securitisation, comments: “This tailor-made solution provided Bunge with a global and scalable programme at favourable rates.”
John Church, relationship manager/executive director at Rabobank, adds: “This programme is an excellent example of good and close cooperation between Bunge, our Rabobank securitisation teams in New York and London, as well as third parties.”
One of the benefits of the programme is that its structure is easily scalable, allowing Bunge to add receivables in most currencies and jurisdictions as its business grows.
Bunge selected this programme because of its preference for off-balance sheet treatment and its need for cost-effective financing and an alternative source of capital.
Finacity Corporation, which acted as the programme’s facility agent, helped Bunge evaluate the proposals from the banks while organising and analysing the company’s historical performance data.
In executing the programme, Finacity also integrated Bunge’s receivables data from 11 selling entities in multiple jurisdictions and provided daily tracking and reporting to the company and the funding banks.
Finacity director, Joe Zalis says: “Finacity is pleased and proud that our structuring and detailed daily reporting helped to achieve a winning outcome for Bunge and each of the deal constituents in this multi-jurisdictional and complex transaction.”
Adrian Katz, Finacity’s chief executive officer adds: “The programme is intended to enhance Bunge’s financial flexibility by providing an additional source of funding for its operations.”
US exports head east
Borrower: Export-Import Bank of China
Mandated lead arranger: Wells Fargo
ECAs: US Exim, Ashra’a
Tenor: 7 years
Law firm: Thompson Coburn
Date signed: September 30, 2011
As China’s economy expands, so does its need for top-quality goods and services that countries such as the US are able to provide. In September last year, Wells Fargo led the execution of four loans totalling US$87.5mn to the Export-Import Bank of China (China Exim) for the purchase of cotton picking equipment.
The funds were on-lent to farms in China, who were then able to acquire the machines from US manufacturer CNH Americas.
The deal is backed by the Export-Import Bank of the US (US Exim) to the tune of US$74.4mn, with Wells Fargo taking direct credit exposure to China Exim for the remaining US$13.1mn.
Israeli export credit agency Ashra’a also guaranteed a portion of the deal because of the small component of Israeli-made
materials in the equipment.
The financing was set at a fixed rate over seven years. The four separate seven-year loans together form the largest financing transaction in 2011 under the framework agreement between the US Exim and China’s ministry of finance; an accord signed in 2005 to make it easier for the bank to help finance purchases of US exports by Chinese government entities. This transaction marks Wells Fargo’s first involvement in the framework agreement.
Richard Yorke, executive vice-president and head of international group at Wells Fargo, comments: “Winning the mandate and closing this milestone transaction required a highly-coordinated effort between Wells Fargo team members in the US, Europe and Asia, as well as the CNH teams in the US, Switzerland and China, and China Exim and US Exim. Leveraging the expertise of Wells Fargo’s global banking team and the long-standing relationships of our global financial institutions group, combined with our local coverage model, was critical to the success of this transaction.”
A model example for Africa
Borrowers: Export Trading Commodities and Agri-Commodities & Finance
Mandated lead arranger: FBN Bank (UK)
Tenor: 360 days
Date signed: March 31, 2011
FBN Bank (UK) closed a US$140mn uncommitted revolving multi-country multi-commodity finance facility last year in favour of Export Trade Commodities and Agri Commodities & Finance, both of which are financing arms of the Export Trading Group (ETG).
ETG’s focus is the African agricultural market, although it is expanding into the Americas, Asia and Europe. The deal is a dynamic financing solution that enables FBN to finance traders in a number of different African regions within one financing structure.
ETG’s head of corporate finance Jean Craven comments: “FBN have provided us with unique flexibility and support to date. They understand the African market which is a key requirement in our business.”
Ayodipo Ogunmoyela, assistant director, structured trade commodity finance at FBN (UK) adds: “ETG is a very dynamic company with healthy growth strategy. FBN appetite for such bilateral business remains strong going into 2012.”
The facility covers many different African countries including Benin, Mozambique, Rwanda, Nigeria and Zimbabwe. It also finances an array of soft commodities such as cashew nuts, coffee, maize, rice, sesame seeds and sugar.
The deal structure features a number of ETG’s regional subsidiaries across the African continent acting as guarantors.
Offtakers involved in the deal include the government of Malawi, Glencore, Noble, Mitsubishi Corporation and the Indian government.
The success of this transaction reflects FBN UK’s growing commodity portfolio within Africa and its commitment to developing the African agricultural sector. FBN UK set up its structured commodity and trade finance team in mid-2009 under the leadership of John Vowell.
Upgrading SCF in China
Mandated lead arranger: Bank of America Merrill Lynch
Tenor: Rollover every 85 days
Date signed: March 31, 2011
Faced with rising supply chain financing costs, Chinese manufacturing company Futaihua (FTH) sought assistance from Bank of America Merrill Lynch (BofAML) in arranging a trade and supply chain finance solution in US dollars.
FTH, a subsidiary of Foxconn China, needed a US dollar solution to manage its supply chain in a cost effective way and to
achieve a natural hedge between payables and collections against US dollar/renminbi (Rmb) foreign exchange exposure.
“Our solution gives them access to competitive offshore trade financing and is also linked to BofAML’s payment capabilities, enabling the processing of large volumes of invoices and ensuring efficient payments to vendors. As a result, Futaihua achieved greater efficiency in supply chain management with substantial cost reductions,” says Bruce Proctor, BofAML’s head of global trade and supply chain finance.
The Chinese government has been determined to rein in inflation by steadily increasing interest rates. Against this backdrop, companies in China are facing increased challenges in managing their supply chains in light of higher financing expenses.
Moreover, expectation of Rmb appreciation also makes US dollar financing from Chinese banks scarce and expensive.
An increase in costs would have directly affected FTH’s ability to be a cost effective provider for global technology companies. And the unavailability of US dollar financing was causing a mismatch of its payables and collections and created an exposure to dollar/Rmb foreign exchange fluctuation risks.
According to BofAML, this solution is “vastly superior” in terms of both cost effectiveness and FX risk management when compared to traditional working capital and trade financing models in China.
The bank has since replicated this solution to other Foxconn China entities and, in doing so, improved the group’s supply chain management efficiency.
Paraguay’s agribusiness gets IFC boost
Borrower: Sudameris Bank
Amount: US$15mn (with an option to increase to US$18mn in year two)
Mandated lead arranger: IFC
Tenor: Up to 12 months, renewable twice for up to three years
Date signed: June 13, 2011
This US$15mn facility is the very first project to be signed and disbursed under the IFC’s Global Warehouse Finance Programme (GWFP).
The investment allows the borrower, Paraguay’s Sudameris Bank, to increase its lending to exporters of soybeans, corn and wheat against warehouse receipts, or warrants.
The IFC estimates that warehouse receipts in Paraguay total approximately US$250mn and that the facility is expected to cover 13% of this market.
According to the IFC, the facility is aimed at developing commodity finance as a viable asset class, thereby expanding access to finance for local farmers and small and medium entrepreneurs in the agribusiness sector, where Paraguay has a strong competitive advantage.
Sudameris began providing loans using warehouse receipts as collateral five years ago and currently has a portfolio of US$20mn. The bank works with farmers, local traders and agricultural exporters in the soybean, corn and wheat sectors.
In the first three months since the disbursement of the IFC’s loan, Sudameris generated more than US$32mn by executing 52 warehouse financing transactions with 23 borrowers. The average size of loan extended to agricultural borrowers was US$630,000.
The IFC’s financing will help Sudameris grow its number of warrants to 45 and increase its portfolio to US$35mn as the bank expands its footprint. “IFC has helped us increase our portfolio by 60% in less than a year,” says Conor McEnroy, president of Sudameris Bank. “By working with farmers and small businesses, we are creating jobs and contributing to economic growth in Paraguay.”
The IFC’s GWFP was launched in September 2010 to increase working capital financing to farmers, traders and exporters in emerging markets by leveraging their own production. The US$200mn programme supports the agriculture sector by facilitating warehouse financing needs though banks, by providing liquidity for onlending and by offering risk mitigation solutions.
“We plan to increase the size of our programme to US$500mn in March to expand access to finance for agribusinesses in merging markets around the globe,” says Georgina Baker, IFC’s director for global trade and supply chain solutions.
LatAm satellites fly high
Mandated lead arranger: JP Morgan
ECA: US Exim
Law firms: Watson, Farley and Williams, Milbank Tweed, Hadley & McCloy, White and Case
Tenor: 8.5 years
Date signed: July 2011
Spanish satellite operator Hispasat signed a €165mn US Exim-guaranteed satellite financing arranged by JP Morgan in July
The facility will be used to finance the construction of a new satellite, Amazonas 3, which will help bring broadband services to the booming Latin America market.
Scheduled for a 2013 launch, Amazonas 3 will be the first Ka-band satellite, with the ability to offer higher bandwidth communication in Latin America; a region with a growing demand for internet access.
According to a statement by Hispasat, the facility offered strong advantages over traditional financing, including longer repayment terms and lower pricing.
Petra Mateos, president of Hispasat, adds: “This solution will open new avenues of growth for the group in its reference markets.”
The facility is mandated lead arranger JP Morgan’s first structured satellite financing. “While we are long-time partners, teaming with US Exim to help Hispasat expand its fleet was something new for us,” says Astar Saleh of JP Morgan’s global trade unit. “We’re pleased to be helping Hispasat better serve its customers in Brazil and Latin America.”
Over the last two years, US Exim has placed a much stronger focus on the satellite sector and has made significant investments to help their respective suppliers expand business internationally.
“JP Morgan is happy to help continue supporting this sector through ECA financing, especially in partnership with key JP Morgan clients such as Hispasat and supplier Space Systems Loral,” explains Patrick Gang vice-president of global trade.
The current Hispasat fleet is made up of high-powered modern satellites providing coverage for Europe, Africa and America.
Rmb first for Angola
Borrower: Huafeng Construção e Engenharia
Amount: Rmb20mn (US$3.1mn equivalent)
Issuing bank: Standard Bank de Angola
Confirming bank: Standard Bank, UK
Tenor: 300 days
Date signed: November 2011
Against the backdrop of booming trade between Angola and China, Standard Bank de Angola issued the first renminbi (Rmb)-denominated letter of credit (LC) in Angola in November last year.
The LC was issued for local construction company Huafeng Construção e Engenharia and facilitates the import of heavy vehicles, valued at the equivalent of US$3.1mn, from Chinese company Sinotruk, and allows for a 230-day deferred payment period.
Both Angola and China have non-deliverable currencies and Standard Bank de Angola added currency hedging to the package through the first non-deliverable forward between the kwanza and Rmb.
By doing so the bank enhanced the benefits of settlement in Rmb and protected its customer from future currency changes.
After 14 years of colonial war with Portugal and 27 years of civil war (which ended in 2002), Angola’s foreign trade has suffered significantly. But a recent oil-fuelled drive to growth and development has helped bring the country back into the international trade scene, especially through interactions with China, Portugal and Brazil.
“This LC has opened new horizons for trade relations between Angola and China, allowing greater proximity between importers and exporters in both countries,” says Duarte Pedreira, head of trade finance at Standard Bank de Angola, commenting on the success of the deal.
“The innovation embedded in this operation allowed us to reaffirm Standard Bank de Angola’s level of sophistication and expertise alongside its commitment to customer service. This is the first of a new series of initiatives that will reinforce existing commercial ties between these two strategic trade partners,” he adds.
Tackling drug crime in Guatemala
Borrower: Ministry of finance for the Republic of Guatemala
Mandated lead arranger: BBVA
ECAs/insurers: Cesce (99% cover), Instituto de Crédito
Tenor: 10 years
Date signed: May 2011
In May 2011, BBVA signed a US$38.2mn ECA-backed financing with Guatemala’s ministry of finance for the import of three radar systems.
The radars are to be used to help with air tracking and monitoring routes used by the narcotics trade in Guatemala. It is part of a wider government-led project to tackle the vast amounts of cocaine that crosses through Guatemala from South America to the north of country where the drugs are smuggled into the US.
This deal has the potential to have a significant impact on the Guatemalan government’s initiative to reduce the drugs trade; a trade that is responsible for the country having one of the world’s highest homicide rates.
The structure of the deal is relatively unusual in that it employs the use of a supercari loan to access a higher level of insurance cover for the transaction.
A supercari is a special loan, with different and better conditions than OECD loans. It is a mechanism that allows the banks to finance 100% of the contractual amount, as well as 100% of the insurance premium. The repayment period is also allowed to be longer than a regular OECD loan.
The supercari requires special approval from Spain’s ministry of industry. BBVA won the deal mandate due to its “longstanding and very successful business relationship with the exporter”, remarks Carina Allendes, head of Americas, structured trade finance at BBVA.
According to Allendes, some of the challenges of the transaction included securing authorisation from Cesce, ICO and the Spanish ministry of industry as well as adapting all the procedures to meet the expectations of the Guatemalan ministry of finance. “During the negotiation of this transaction, the elections took place in Guatemala, and that always slows down the decision-making processes,” Allendes adds.
Kosmos Energy lines up credit
Borrower: Kosmos Energy
Mandated lead arrangers: Absa Capital, Barclays. BNP Paribas, Crédit Agricole, HSBC, Natixis, Société Générale, Standard Chartered
Participating banks: Bank of America Securities, BTMU, Citigroup, Crédit Suisse, Deutsche Bank, DnB Nor, Ecobank, FBN Bank, ING, Nedbank, Siemens, SMBC, Stiching Pensionenfonds, Standard Bank, UniCredit
Law firms: Clifford Chance; Slaughter & May
Tenor: 7 years
Date signed: March 28, 2011
Oil exploration and production company Kosmos Energy lined up a group of international banks to secure a US$2bn senior secured borrowing base facility in March last year.
The deal was closed a few months after first oil was reached at Ghana’s offshore Jubilee oil field, in which Kosmos has a
The seven-year facility will be used to refinance the company’s existing US$1.25bn financing package, which was originally implemented in July 2009 for US$750mn and upsized several times. It will also provide Kosmos with additional sources of funding to develop assets beyond Jubilee phase one.
“The Kosmos financing shows how flexible and innovative oil and gas banks can be when their in-house reservoir engineers are comfortable with the underlying value of the asset,” says Olivier Warnan, director within the E&C finance team at BNP Paribas.
“This financing is a great success for the banks, but is also a great achievement from Kosmos who very successfully entertained a high level of competition amongst its bank group,” he adds.
The structure of the facility includes an accordion feature which allows the borrower to increase the facility amount to US$3bn, should the lenders wish to up their commitments.
Just two months after the deal was signed, Kosmos raised more than expected in its initial public offering, which brought an additional source of liquidity (US$580mn of net proceeds) to support the company’s investments over the coming years.
Kosmos, operator of the West Cape Three Points Block, drilled the Mahogany 1 exploration well that discovered the Jubilee field in 2007, one of the largest offshore West African oil discoveries made in the last decade.
Metalloinvest sets PXF record
Initial mandated lead arrangers: BNP Paribas, Deutsche Bank
MLAs: Société Générale, ING, Commerzbank, Credit Agricole, Credit Suisse, Natixis, Nordea, RBS, The Bank of Tokyo Mitsubishi UFJ, RBS, UniCredit, WestLB
Senior lead arrangers: SMBC, Bank of America Merrill Lynch, Sberbank, Intesa Sanaolo Bank
Tenor: 5 years (US$3bn tranche) 7 years (US$100mn tranche)
Pricing: 225 basis points
Law firm: Linklaters CIS
Date signed: April 4, 2011
Metalloinvest closed the largest pre-export finance (PXF) syndication in Russia’s metal and mining industry since the 2008-09 crisis.
BNP Paribas and Deutsche Bank were initial mandated lead arrangers for the massively oversubscribed US$3.1bn debt facility, which was originally set for US$1.2bn. The facility was a particularly important event in that it was a true syndication in a market now dominated by club deals.
Dirk Fehring, managing director, corporates & structured finance, commodity finance at WestLB, comments: “There had been few ‘real’ syndicated facilities of this size in the market since the financial crisis, so market appetite and investors’ responses were difficult to assess back in Q1 2011, in particular in the light of a highly competitive margin grid at that time and the fact that the facility actually did refinance a PXF which had to be restructured as the consequence of the global financial crisis in 2009.”
The previous facility was a US$1.2bn loan closed in 2008. Lenders were drawn to the deal due to the quality of the borrower, remarks Kris van Broekhoven, head of structured commodity and trade finance for the Emea region at Deutsche Bank.
“Banks liked the deal as it was not only well-structured, but also reflected the impressive pace of deleveraging and cost reduction the company showed since late 2008.
Murad Sharapov, global energy & commodities, mining & metals at Natixis agrees, remarking that the deal was well-received by the market due to refinancing nature of the deal and the group’s sound financial performances.
Ilia Poliakov, head of Russia & CIS, structured energy & metals at Société Générale further comments: “This exceptional transaction, one of very few Russian deals which hit the US$3bn threshold since 2008, demonstrated once again Metalloinvest’s attractiveness to the banking market.”
Christoph Sawall, director at WestLB praises the timing of the transaction too.
“Metalloinvest also did a great job in terms of timing as they launched the syndication in Q1, when the markets were still very liquid, syndicating this deal in a phase of very positive market sentiments, ahead of the later eurozone debt crisis.”
A model borrower in Ukraine
Mandated lead arrangers and bookrunners: Deutsche Bank, ING, Natixis, UniCredit, WestLB
MLA: BNP Paribas
Participating banks: Barclays, BTMU, Credit Suisse, Erste Bank, Rabobank, Raiffeisen Bank International
Law firm: White & Case (lenders)
Tenor: 5 years
Pricing: 300 basis points
Date signed: November 10, 2011
Ukrainian steel producer Metinvest secured a US$1bn five-year pre-export finance facility in November last year. The deal was oversubscribed from the originally planned US$850mn, making it the largest transaction raised for a Ukrainian borrower in 2011.
The facility replaces two previous PXF facilities on improved terms.
Deutsche Bank was the coordinating bookrunner and mandated lead arranger. The pricing is lower than the 550 basis points over Libor paid on a PXF signed by Metinvest in August 2010.
The Ukrainian company had to accept the higher pricing in 2010 due to the lack of confidence within bank credit committees about the Ukrainian steel sector following a number of restructurings.
However Metinvest did not go through any restructurings itself and one banker has previously remarked to GTR that the company was a “model borrower” in the PXF market. Therefore the company was eager to refinance its facilities at a lower pricing.
Kris van Broekhoven, Emea head of structured commodity and trade finance at Deutsche Bank, comments: “The company is one of few steel producers that did not breach any covenants following the dramatic fall in demand and prices during that period.”
Marc Thumecke, co-head mining and metals, project and commodity finance at UniCredit adds: “Based on their strong vertical integration, their excellent cost position, and their moderate indebtedness, the Metinvest group is very well positioned to manage the cyclicality of the steel and the financial markets.”
“This facility was one of the only few transactions in 2011 which in fact was fully underwritten by the bookrunners,” adds Dirk Fehring, MD, corporates & structured finance, commodity finance at WestLB.
Despite the strong profile of the borrower it was still a significant achievement to secure an oversubscription on a deal closed as the global markets were getting increasingly volatile.
“Bookrunners and Metinvest managed to close and fund just before the significant worsening of the eurozone market,” comments Simon Marielle, director, structured debt, metals & mining, global energy and commodities at Natixis.
ECAs light up Vietnam
Borrower: VCM Mong Duong Power Company
Amount: US$1.5bn (part of US$2bn total project cost which includes US$0.5bn of equity)
MLAs: BNP Paribas, Crédit Agricole, HSBC, ING; Mizuho, Natixis, SMBC, Société Générale, Standard Chartered, UniCredit
Bookrunners: BNP Paribas, Crédit Agricole, HSBC, ING Natixis, SMBC, Société Générale
ECAs: Kexim, K-Sure
Tenor: 18 years
Law firms: Latham & Watkins; YKVN; Shearman & Sterling; Freshfields Bruckhaus Deringer
Date signed: 8 July 2011
AES VCM Mong Duong Power Company secured a US$2bn loan in July last year to fund the biggest power project to date in Southeast Asia.
Mong Duong 2 is being developed under a 25-year build-operate-transfer contract in Vietnam. The coal fired power project is the first IPP financing in Vietnam since 2003, and is also the largest Asian project finance syndication of 2011.
The total cost of the project financing is US$2bn, and comprises a US$1.5bn debt tranche and a US$0.5bn equity tranche.
The mandated lead arrangers on the debt facility are BNP Paribas, Crédit Agricole, HSBC, ING, Natixis, Société Générale,
SMBC, UniCredit, Mizuho and Standard Chartered.
Daniel Klinger, Natixis head of project finance, Asia Pacific says: “The large debt of US$1.5bn was financed at a time of economic turbulence in Vietnam. It was the tight deal structure, the strong sponsorship lead by AES Corporation and the involvement of Korean export credit agencies that resulted in the successful financing of this transaction.”
Export credit agencies (ECAs) K-Sure and Kexim are providing cover for the commercial tranches.
Stephanie Clement de Givry, regional head for natural resources and energy project finance at Société Générale CIB, notes: “The support of the Korean ECAs providing a combined 85% cover enhanced the appetite of international banks to take the residual project and country risks over 18 years.”
Christopher Green, managing director of export finance at HSBC, adds: “The Mong Duong 2 independent power project (IPP) is a strong illustration of HSBC’s ability to deliver complex, well-structured ECA financing solutions to its global clients. Mong Duong 2 represents the largest financing ever raised in Vietnam, the largest debt raising exercise of AES and the first large scale involvement of the Korean export credit agencies K-Sure and Kexim in the country.”
Mark Giblett, SMBC’s head of power and infrastructure, Asia concurs: “The Mong Duong 2 project is a milestone Vietnamese power project which was closed despite the challenging market. This is a testament to the strong project sponsors and the robust project structure. We expect it to be used as a template for future IPPs in Vietnam.”
Brazilian softs bounce back
Borrower: Multigrain SA
Bookrunners and mandated lead arrangers: ABN Amro, Crédit Agricole, ING
Mandated lead arrangers: Banco do Brasil, Citibank, SMBC, WestLB
Arrangers: HSBC Brazil, Mizuho Corporate Bank, The Bank of Nova Scotia
Manager: Deutsche Bank Banco Alemao
Law firms: Santos Netos Advogados (Brazilian law); Landay & Leblang (New York law); Clifford Chance (Dutch law)
Tenor: 19 months
Date signed: July 20, 2011
The Brazilian soft commodities producer and trader Multigrain SA signed a US$500mn pre-export financing via a group of lenders in July last year. The transaction is remarkable due to the size of the deal; one of the largest loans ever granted to a soft commodity company in Latin America.
“This was an extraordinary deal in Latin America in 2011,” comments Domicio dos Santos Neto, partner at law firm Santos Neto Advogados.
The facility will be used for the financing of the production, trading, storage and export of Brazilian soybeans, cotton, wheat and corn.
Multigrain SA is a subsidiary of Multigrain AG. In May 2011, Multigrain AG was fully acquired by the Japanese firm Mitsui & Co, making it Mitsui’s largest investment in the agri-sector.
The pre-export facility was arranged without a guarantee from Mitsui & Co. However, Agricola Xingu, Multigrain’s sister company, acts as a guarantor covering all Multigrain’s obligations under the PXF. Agricola Xingu owns farms in the Maranhão, Minas Gerias and Bahia states in Brazil where it produces soybeans, cotton and corn.
Fausto Caron, director, head of commodities Brazil at ABN Amro, comments that it was the strength of the borrower that helped make the deal a success: “The careful selection by Multigrain of leading banks in the commodities financing arena and the positive track record of the company in previous syndicated deals provided further comfort to the participant banks to enthusiastically join this transaction”.
The signing of the deal suggests a return of confidence amongst lenders in Brazil’s agri-sector as well as a reactivated Brazilian secondary market.
“From 2008 to 2010, there were an unprecedented number of defaults in pre-export financing transactions in Brazil,” comments Ana Gambogi, partner at Santos Neto Advogados.
“Most banks, facing their own difficulties worldwide during this period, stopped to operate in the secondary market, thus there were virtually no truly syndicated deals in Brazil during these years.”
“The oversubscription of the Multigrain facility clearly demonstrated the strong appetite for top-tiers in the Brazilian soft commodity sector,” confirms Martin Schmitz, executive director, structured finance, Latin America at WestLB.
Noble deal heralds change in Chinese market
Borrower: Noble Group
Lender: Agriculture Bank of China
Importer: Noble Carbon Credits
Exporter: Jinan Iron and Steel Group
Tenor: 2 years
Date signed: April 28, 2011
In April 28, 2011 a €15mn certified emission reduction (CER) prepayment financing was signed by Agriculture Bank of China in favour of trading company Noble Group. It is the first prepayment financing that Noble Group has ever achieved with a Chinese bank.
“More importantly it marks a premier and successful transaction for Agriculture Bank of China, a Chinese bank, to enter into a traditional pre-export prepayment, which has profound influence on helping to promote subsequent prepayment financing projects to Chinese banks,” comments Jaime Teke, global head of structured finance at Noble Group.
A spokesperson for Agriculture Bank of China says that the bank is “committed to assist clients in improving their competitiveness, and creating extra value for them through continuous innovations”.
The structure of the deal works by Noble Group signing a limited recourse prepayment facility with Agriculture Bank of China. Noble’s subsidiary Noble Carbon Credits (NCCL) then takes on the facility via an inter-company loan.
NCCL then makes a prepayment to Chinese steel producer Jinan Iron and Steel Group Corporation (Jigang). The facility acts as a prepayment for the delivery of CERs to NCCL.
NCCL acts as the importer of the CERs and has signed a two-year purchase and sa