Market conditions remained tough in 2013, but the year produced some very interesting deals. There were numerous trends to appear, the threads of which are apparent throughout our choice of Best Deals. The demand for export credit remains and while some expect this to subside as banks strengthen their positions, the market still seems to crave the long tenors and security ECAs bring to transactions. They were heavily present on a number of our larger winners, such as Sadara, Nghi Son and Mobily.
We’ve also seen the return of the French banks to large transactions. It’s something which was much talked about in the years leading up to 2013. But last year was when they started reappearing on tickets in earnest. Their liquidity is welcome back in the market, as can be seen by their presence on winning deals everywhere from Saudi Arabia and Vietnam to Angola and Armenia.
It’s also heartening to see some new names on the roster. The Orion Oil deal marked the largest locally-syndicated loan in Central African history, NZ Farming secured the largest private sector syndication in Uruguayan history, while ZCMC became the first Armenian company to launch and close a syndicated loan facility in the international loan market. Congratulations to all the winners.
Bahra Cable ties up warehouse financing
Borrower: Bahra Advanced Cable Manufacturing Co (BCC)
Amount: US$200mn
Mandated lead arranger: Standard Chartered
Law firms: Clifford Chance; Al Jadaan & Partners; Baker & Mackenzie
Tenor: 270 days revolving
Date signed: October 2013
This first-of-its-kind transaction in Saudi Arabia sees borrower, Bahra Advanced Cable Manufacturing Co (BCC) monetise its inventory and receivables into cash for the very first time, thus freeing up a considerable amount of working capital.
The US$200mn Islamic structured warehouse financing solution and Islamic export invoice finance facility was arranged by Standard Chartered and is an important milestone for the bank because it is the first inventory-based transaction to be completed in Saudi Arabia, and its largest structured asset in the Kingdom.
What’s unique is that the deal involves an Islamic (musawama) ownership structure that differs from standard forms where the inventory would be bought from the client and sold immediately with a deferred payment term. “Here the inventory is held and sold on behalf of the bank, which strengthened Standard Chartered’s security position and eliminated an array of complexities brought about by a vanilla security structure,” explains Stephan Riekert, director, solution structuring team, transaction banking at Standard Chartered.
While musawama is not new to the trade finance market in Saudi, the ownership structure of this facility, combined with the end-to-end purchase-to-sale financing capability makes this facility particularly innovative to the Saudi market. BCC is the second-largest cable manufacturer in Saudi Arabia, and a subsidiary of Construction Products Holding Company, the largest contracting group in the Middle East. The funds are being used to finance the company’s inventory and sales of high and low-voltage electrical cables and wires in Saudi Arabia.
Standard Chartered’s Riekert tells GTR that the facility is a testament to the bank’s “ability to utilise our trade and Islamic expertise in structuring complex solutions to meet a client’s needs and deliver a truly transformational solution in a highly over-banked and liquid market”. “The teamwork and co-ordination between our coverage and product teams was critical in enabling us to deliver the right solution for the client. The deal helps strengthen our presence and profile within the Saudi market,” he adds.
Angola shores up dam financing
Borrower: Angolan ministry of finance
Amount: €560mn (split into three facilities)
Initial mandated lead arrangers: HSBC, Société Générale
Mandated lead arrangers: BBVA, BHF, Caixabank, Santander, SEK
ECAs/insurers: Cesce, EKN, Euler Hermes, Miga
Law firms: Dentons; MC&A
Tenor: 13.5 years
Date signed: June 28, 2013
The Angolan government secured one of its largest export credit packages to date in June last year for the second phase of its Cambambe hydroelectric power plant. Once completed, the project is expected to add as much as 50% to Angola’s installed power generation capacity, and as such will have a considerable positive impact on the country’s economic development.
Initial mandated lead arrangers HSBC and Société Générale raised a total €560mn across three facilities: a €291.7mn Miga-backed facility (marking the first time for Miga to support a transaction with the Angolan government, and also the largest facility concluded under Miga’s non-honouring of sovereign financial obligations scheme globally); a €156.7m Cesce-backed facility; and a €111.1mn Euler Hermes-guaranteed facility, part-insured by EKN.
“We are delighted to have contributed as initial MLA to the arranging of this landmark transaction for the Republic of Angola, which will very substantially increase the electricity generation in the country,” says Valérie Mace, Société Générale’s head of structured export finance, Africa.
Six banks in all supported the transaction, as did Sweden’s SEK (it contributed a tranche to the Hermes-supported facility).
“The project is of top priority for the Angolan government, which concluded that the ECA solution would represent the most attractive means of raising the required debt. Cesce and Euler Hermes were joined by Miga on this occasion, which were keen to support such an important project for the country,” says Richard Hodder, managing director of export finance at HSBC.
Specifically, phase two of the Cambambe project involves the construction of a new powerhouse for the dam, with four additional turbine generators, as well as the construction of a concrete spillway on the basis of an EPC contract awarded to Odebrecht of Brazil. Odebrecht selected Voith Hydro of Germany and Elecnor of Spain as sub-contractors for the provision of mechanical and electrical equipment and services respectively.
Angola is implementing an “ambitious” infrastructure investment programme, says Hodder, who believes that ECA financing
will continue to play a key role.
Another brick in the wall
Borrower: Carillion Construction
Amount: £100mn
Mandated lead arranger: RBS
Participating bank: BNP Paribas
Tenor: 364 days
Date signed: January 2013
Last year RBS structured a supplier finance programme for British construction services company Carillion; a solution which forms part of the company’s working capital strategy.
This source of off-balance sheet financing is aimed at allowing Carillion’s suppliers the chance to obtain competitive funding, based on the company’s own credit strength.
For the last two years Carillion has been offering an early payment facility (EPF) to its suppliers as part of a package of measures under which suppliers agree to standard terms of 120 days, but can use the EPF to access payments in line with, or in advance of, their existing terms.
Under the terms of the initiative, every supplier can opt for payment earlier than under their existing terms, and all suppliers gain the flexibility of being able to nominate when they receive payments in respect of approved invoices. RBS’s supplier financing solution for Carillion feeds into this initiative.
Carillion’s EPF is in support of the UK government’s supply chain finance initiative, which was announced in 2012 by the prime minister, who at the time said: “In the current climate, viable business can struggle to get the finance they need to grow – this scheme will not only help them secure finance and support cash flow, but will help secure supply chains for some of our biggest companies and protect thousands of jobs.”
RBS’s financing programme for Carillion received additional funding from BNP Paribas: the French bank’s participation doubled the size of the programme to £100mn.
Carillion has more than 18,000 suppliers in the UK. “We are delighted with the way in which our Early Payment Facility (EPF) is working. It is extremely popular with our suppliers, because it gives them flexibility to choose when they take payments,” Lee Mills, Carillion group treasurer says to GTR.
The construction sector has been the hardest hit by the reduction in lending to small businesses and, according to the Bank of England, small businesses in the sector only received 7% of bank loans that were granted to small businesses in total in 2013.
IFC goes for green
Borrower: emerging market issuing banks enrolled in the IFC’s GTFP
Amount: US$641mn (year to date in 2013)
Co-ordinator: IFC
Tenor: up to three years
Date signed: March 1, 2013
An initiative launched in March to benefit transactions with climate-change advantages has already financed over US$600mn in related goods.
The IFC’s Climate Smart Trade Programme works with the corporation’s bank partners to support the trade of goods and services that enable their corporate clients to adopt energy-efficient technologies, cut carbon emissions and ensure the sustainability of their operations and supply chains.
The initiative is an extension of the IFC’s Global Trade Finance Programme, which sees the IFC offer confirming banks part or full guarantees covering payment risk on issuing banks in emerging markets for trade-related transactions. Under the Climate Smart Trade Programme, these transactions need to have clearly-defined climate-change benefits.
As part of this initiative, for example, the IFC has guaranteed a €4.3mn standby letter of credit to enable the shipment of turbines, generators and associated equipment for the Kashimbila Dam in Nigeria. This specific transaction has a three-year tenor and the IFC’s guarantee will support the construction, testing and commissioning of the hydro dam, set to be commissioned in April this year.
Other projects backed by the IFC have been in Russia (for energy-efficient equipment at a local petrochemical plant), India (for low-emission equipment from the US) and Ukraine (for energy-efficient subway rail cars and equipment from Japan), among other countries also including Brazil, Pakistan and Vietnam.
“The challenge of climate change requires innovative solutions and new partnerships to drive more investment in renewables and expand access to modern energy in developing countries,” says Georgina Baker, global head of trade and supply chain solutions at the IFC.
A new asset class
Borrower: Drax
Amount: £75mn
Financial advisor and distributor: Barclays
Lender: Friends Life
Insurer: HM Treasury (Infrastructure UK Guarantee Scheme)
Law firms: Slaughter and May; Allen & Overy; Simmons & Simmons
Date signed: April 30, 2013
Drax’s £75mn private funding for the conversion of their coal-fired power station to biomass was the first ever to be underpinned by a guarantee from the UK government under the Infrastructure UK scheme.
The scheme was launched by HM Treasury in July 2012 in a bid to kick-start critical infrastructure projects that have stalled because of adverse credit conditions. Up to £40bn-worth of guarantees will be available for UK infrastructure projects until the end of 2016.
As sole financial advisor, Barclays worked with Drax and IUK to structure, document and distribute the financing, which was funded by institutional investor Friends Life.
“The HM Treasury guarantee enabled Drax to reach a wider group of investors that would not have normally been possible,” explains Nicholas Stockdale, Barclays’ head of developed markets, Capex financing solutions group. The amortising loan facility, which matures in June 2018, replaces £50mn of the £100mn loan facility agreed with the UK Green Investment
Bank and signed in December 2012.
Commenting on the facility, Tony Quinlan, Drax finance director, says: “This further strengthens our balance sheet, as we progress our project to transform the largest coal-fired power station in the UK into an electricity generator fulled predominantly by sustainable biomass.”
The benefits are multiple, from securing jobs at Drax and across the UK in the supply chain to providing low-carbon, cost-effective and reliable renewable power for the consumer. “The facility is highly-structured, but has the ability to be replicated for other trades,” says Gabriel Buck, head of Barclays’ ECA and capex financing solutions group.
“This new asset class will undoubtedly grow. We are already mandated by other clients to advise and arrange similar structures for their UK infrastructure projects.” Buck adds that the fact that facility is non-bank funded reinforces the idea that the banking market may no longer be the most optimal form of funding for these types of transactions.
Mobile Kingdom
Borrower: Mobily
Amount: US$646mn
Mandated lead arrangers: Crédit Agricole, Deutsche Bank
ECAs/insurers: Finnvera, EKN, SEK, FEC
Law firms: Allen & Overy; Latham & Watkins
Tenor: 10.5 years
Date signed: July 11, 2013
The rate of infrastructural development in parts of the Middle East, perhaps most notably in Saudi Arabia, is so rapid, that it is often forgotten that financing it can prove to be more structurally challenging than elsewhere in the world, particularly when the financiers aren’t indigenous to the region. So it was with the twin murabaha telecoms equipment financing secured by Saudi telecoms company Mobily – a subsidiary of Etihad Etisalat – last year. It marked the first time some of the ECAs involved had dealt with a shariah-compliant financing package. It was also the largest ECA-backed financing to have been secured by Mobily, all of which makes the fact that it was closed within about two months of being mandated all the more remarkable.
“We expect that this deal success will display a high-level of confidence in the outlook for ECA financing for those tapping the market for the first time and also for shariah-compliant ECA structures in the region,” says Crédit Agricole’s director of export and trade finance for the Middle East Philippe Leduc, when asked of the significance of the transaction for the region and for the industry. Indeed, for a region which is so liquid, ECA financing has arguably not taken off as much as it has elsewhere in the world. 2013, however, saw a number of high-profile transactions involving agencies.
James Pumphrey, Deutsche’s head of structured trade and export finance, UK, says the complex structure required close co-operation between all those involved. He continues: “Mobily was very clear in its requirements, and took the commercial yet pragmatic approach to negotiation necessary to meet time constraints. Equally vital to the success of the transaction were the flexibility and willingness of the ECAs and funding entities to dedicate their full resources in order to ensure financial closing in a timely manner.”
Vietnam’s largest FDI
Borrower: Nghi Son
Amount: US$5bn
Mandated lead arrangers: Al Ahli Bank, Apicorp, Aozora Bank, ANZ, Commercial Bank of Kuwait, Crédit Agricole, DBS Bank, Development Bank of Japan, DZ Bank, HSBC, BTMU, Mizuho, National Bank of Kuwait, Natixis, Norinchukin Bank, OCBC, Shinkin Central Bank, Shinsei Bank, Shizuoka Bank, Siemens Bank, SMBC, Société Générale, Tokyo Star Bank
ECAs/insurers: Coface, Euler Hermes, JBIC, Kexim, Nexi, UKEF
Law firms: Allen & Overy; Allens
Tenor: 16 years
Date signed: June/November 2013
The Nghi Son petrochemicals refinery complex in Vietnam will be the country’s second such facility. Upon completion, it will have a planned capacity of 200,000 barrels of oil a day – vital fuel for an economy growing as strongly as Vietnam (the country grew at 5.42% in 2013), and one which has been traditionally reliant on energy imports. Vietnam has extensive oil and gas reserves and it’s estimated that an additional 50% remains undiscovered. The investment in infrastructure such as this will no doubt lead to a step-up in exploration.
Construction started on the project in Q3 2013, with the diverse mix of contractors reflected in the heavy export credit presence. The Vietnamese government expects that the project’s construction will create “thousands” of jobs, while once operation, the plant will support more than 1,000 jobs in the area.
The overall project cost is expected to top US$9.2bn and with US$5bn coming in the form of debt, it is what Société Générale describes as “the largest and most visible refinery with an international project finance package in Asia to date”. The project will represent the largest foreign direct investment in Vietnam’s history.
Sylvia Leclercq, head of structured export finance at Société Générale, tells GTR that the bank is “delighted to be part of the landmark transaction”, which she says will contribute to Vietnam’s long-term development and reduce its dependence on imported products. She continues: “It involves no fewer than seven export credit agencies, illustrating lenders’ appetite for well-structured and strategic project finance transactions.”
SMBC, another of the MLAs, praised the “considerable co-ordination across seven ECAs and 22 private banks, addressing various structural issues related to the transaction”.
Crossing small borders
Borrower: NZ Farming Systems
Amount: US$100mn
Sole arranger and underwriter: ING
Lenders: Banco do Brasil, Bladex, Monte dei Paschi di Siena Financial intermediary: Santander
Law firms: Jiménez de Aréchaga; Chadbourne & Parke; Clifford Chance
Tenor: Two years
Date signed: December 27, 2013
Outside of South America, Uruguay is better-known for churning out world-class footballers than agricultural produce, but the country’s dairy sector has been growing at a breakneck speed in recent years. Between 1975 and 2011, production of dairy products tripled to 2.2 billion tonnes.
Between 2001 and 2012, dairy exports rose five-fold, with demand growing in neighbouring markets for powdered milk, cheese, butter, whey and long-life milk from South America’s second-smallest country.
But it has often proven to be a difficult market to penetrate for international banks, with government levies in place to help protect the local financial sector. The growth in the dairy sector though has made the requirement for international finance more pressing: producers need better machinery, the demand for capital machinery has risen. This transaction helped satisfy all the requirements. It was the largest syndicated transaction in Uruguay for a non-government entity.
ING’s director of syndicates, Americas, Samuel Canineu, explains the challenges and motivations behind putting together such a deal: “Cross-border financing in Uruguay is taxed in order to protect the local banking industry. A deal like the one structured for NZ Farming, combining cross-border guarantees with local funding, could be replicated to provide a new financing alternative for large investments in other growing sectors such as pulp and paper, oil, grain crushing, etc, while maintaining protection for the local banking industry.
“Co-ordinating both onshore and offshore discussions and documentation simultaneously, with documents in English and in Spanish, under New York and Uruguayan laws was challenging. Within Uruguay, each lending bank is required to obtain approvals for credit limits on ING, as standby letter of credit (SBLC) issuer, and ING itself needed credit approvals for the banks providing back-up to such SBLCs.”
The rise of the regionals
Borrower: Orion Oil
Amount: US$500mn
Sole arranger and underwriter: Ecobank
Lenders: UBA, Afreximbank, BGFI Bank, Banque Atlantique
Law firms: Linklaters; Heenan Blaikie
Tenor: Two years
Date signed: October 26, 2013
You can set your watch by some of Africa’s largest, most regular syndicated pre-export financings. International lenders flock to the likes of Cocobod and Sonangol – the so-called ‘elephant deals’ – on an annual basis. But to see a large PXF funded solely by African banks is more unusual. The Orion Oil deal closed last October was the largest syndicated deal to be raised in Central Africa, to have been funded solely by African banks. It shows the increased appetite among regional banks to fund capital-intensive trade finance deals.
The deal facility serves as a pre-payment of crude oil cargos, supplied by the Republic of Congo’s national oil company SNPC to Orion Oil over a 24-month period the finance is broken into two tranches, one dollar-denominated to the value of US$342mn and one Central African franc-denominated to the value of XAF158mn.
Adonis Seka, Ecobank’s regional manager for Côte d’Ivoire, tells GTR that the structure proved to be one of the main challenges, but that he also expects this to be a template for future deals going forward.
He says: “A challenge was the coverage mechanism of the currency risk related to the transaction. This transaction will definitely be a model for future deals. This is a landmark achievement, which reflects the long-term aims of African countries in the development of key economic sectors, such as oil and gas. African countries are seeking to strengthen and develop local capacity and capabilities.
“They also show a strong willingness to empower indigenous companies to play a key role in the oil and gas industry by setting up local content policies/acts. Hence, priority is progressively being given to local companies in terms of allocation of products and services. This local content policy approach should see the replication of Orion-like deals going forward.”
Reliance grows ECA wealth
Borrower: Reliance Industries (RIL)
Amount: US$3bn (four ECA-backed facilities)
Mandated lead arrangers: ANZ, BTMU, DBS Bank, DZ Bank, HSBC, ING, JP Morgan, Nord LB, Santander, SMBC, Standard Chartered
ECAs: Coface, UKEF, K-sure, US Exim
Tenors: 3.5 + 10 years (K-sure and US Exim facilities); 3 + 7 years (Coface facility); 3 + 10 years (UKEF facility)
Law firms: Allen & Overy; de Pardieu; Juris Corp; Kim & Chang; Milbank; Vedder Price
Dates signed: February (US Exim); March (K-sure); September (Coface); October (UKEF) 2013
Last year, RIL, India’s largest private sector company, successfully tied up four facilities backed by export credit agencies (ECAs) – US Exim, K-sure, Coface and UKEF – for a total of US$3bn. The GTR team has grouped these four ECA-supported buyer credit programmes together for the purposes of our award, as we feel they all have the merits to be given the Best Deal status.
Each of the facilities is structured as a framework agreement, enabling RIL to finance existing and future contracts with suppliers in the relevant countries. Specifically, the financing will be used for various RIL projects at Jamnagar, Dahej, Hazira and Silvassa. Despite being used to finance the same set of projects, each ECA transaction was negotiated individually. Benefits include competitive pricing as well as Reliance’s “better than sovereign rating” as gauged by the ECAs (marking the first time for a corporate to be accredited that status by an ECA).
What’s more, the facilities have all been structured in a way that enables the financing of relatively small contracts with a large number of SME exporters. Many of the suppliers are SMEs that have not previously been supported by ECAs.
Reliance senior vice-president Vineyesh Sawhney tells GTR that increasingly taking advantage of ECA-backed financing has been a “very productive diversification exercise” for the energy giant, which also looks to the debt capital markets and syndicated loans to shore up the financing it needs.
“This has also helped secure financing at the beginning of project implementation while providing us flexibility to meet funding requirements over an extended availability period of up to 3.5 years. We have entered into framework agreements where orders can be placed over the availability period of the facility,” he says.
Over the past two years, RIL has raised US$5.4bn equivalent from six ECAs around the globe. The company is also in negotiations with six more ECAs for further financing to be closed in the next few months, Sawhney tells GTR.
The Russian giant returns
Borrower: Rosneft
Amount: Up to US$10bn
Bookrunners: BofAML, BNP Paribas, Citi, Deutsche, HSBC, JP Morgan, Société Générale
Mandated lead arrangers: Glencore, Vitol, BofAML, BNP Paribas, Citi, Crédit Suisse, Deutsche, HSBC, ING, JP Morgan, Morgan Stanley, Santander, Société Générale, SMBC
Lead arrangers: ABN Amro, Barclays, Lloyds, Rabobank, UBS
Facility agent, security agent, documentation agent: Deutsche Bank
Law firms: Linklaters
Tenor: Five years
Date signed: March/May 2013
Large Russian energy companies are regular fixtures on this list. Each year, there are a couple of transactions that raise eyebrows. And it seems that each year, Rosneft taps the international markets for vast amounts of liquidity, begging the question: is this the most bankable company in the world? Certainly, the planet’s largest oil company has no shortage of suitors.
Says Sander Stuijt, Deutsche Bank’s head of structured commodity trade finance for Emea: “Not only was this transaction one of the largest prepayments in the Russian market, it has also started a trend for other commodity producers to raise finance on the back of commercial contracts.”
Kris Van Broekhoven, global head of commodities finance, treasury and trade at Citi, adds: “The only reason the deal closed for such a large amount is because a significant number of banks committed very large tickets. This was only possible through combining a solid structure with a first-class performance obligor, and the effort put in by Glencore and Vitol to convince these banks to put their balance sheet to work. This transaction shows that performance risk finance is still considered by banks as a smart way to lend to strategic exporters of commodities.”
At GTR’s CIS trade and export finance conference in Moscow recently, attendees spoke of the fact that Russian companies are now looking back to the lending markets, having spent a few years courting the capital markets. What odds, then, on Rosneft winding up on this list again for 2014?
Project Record-breaking
Borrower: Saudi Aramco,Dow Chemicals
Amount: US$12bn
Financial advisors: RBS, Riyad Bank
Mandated lead arrangers: ADCB, Arab National Bank, Apicorp, Citi, Crédit Agricole, Banque Saudi Fransi, Barclays, BNP Paribas, Goldman Sachs, HSBC, KfW Ipex, Korea Finance Corporation, Mizuho, NBAD, National Bank of Kuwait, QNB, Riyad Bank, Samba Financial Group, Standard Chartered, SMBC, BTMU, National Commercial Bank, SABB, Saudi Investment Bank
Facility agent: Deutsche
ECAs/insurers: Coface, EDC, Euler Hermes, FIEM, Kexim, K-Sure, UKEF, US Exim
Law firms: Milbank; White & Case; Shearman & Sterling
Tenor: 16 years (commercial), 17 years (ECA)
Date signed: June 16, 2013
For its sheer scale alone, it’s hard to look past the mammoth Sadara financing in Saudi Arabia when thinking of the most impressive deals of 2013. It will be the largest petrochemicals facility in the world, to be built using the largest project financing facility of 2013 and one of the largest project financings in history. It marked the largest-ever direct loan by US Exim, and the largest-ever guarantee issued by UKEF too. But there are plenty of arguments to be made on the complexity of the financing as well.
There were six ECAs here – each of which looking out for its own national benefit. The range of commercial and development banks, as well as non-bank lenders, took in more than 10 nationalities, all of which adds up to startling logistical complications.
Speaking with GTR earlier in the year, a partner of one of the law firms on the deal spoke of meetings with 70 people around a table, trying to agree on the terms of a 300-page document. “It was a complex management task to align various ECAs and their requirements with the timetable,” says Andrej Nötzel of KfW Ipex’s basic industries team.
For Saudi Arabia, the Sadara deal has the potential to nurture a whole new industry – something which could have huge value in a country which desperately needs to diversify its economy. The plant is likely to spawn a host of new downstream plants and industries in the Jebail region, on the Persian Gulf, creating jobs and a non-oil-based focus for the economy.
Tangsteel shows its mettle
Borrower: Tangshan Iron & Steel Group (Tangsteel)
Amount: US$800mn
Co-ordinating mandated lead arranger and bookrunner: Deutsche Bank (also facility agent, account bank and security agent)
Mandated lead arrangers: ABN Amro, BNP Paribas, DBS Bank, HSBC, ING, Natixis, Rabobank, Société Générale, Standard Chartered, United Overseas Bank
Law firm: Norton Rose Fulbright
Tenor: 2 years
Date signed: October 25, 2013
The GTR team was unanimous in deciding that the largest structured commodity trade finance facility ever completed for a Chinese company was worthy of a Best Deal award.
Although this is not the first time for Tangsteel to tap the syndicated market (it did so twice in 2012), the amount was more than double any of its previous facilities.
The facility is for Tangsteel’s exports to Duferco on steel products via its Hong Kong trading platform, Sinobiz. “Even though this was the third repeated financing arrangement for Tangsteel’s pre-payment structure, which Deutsche Bank first lead-arranged and closed in May 2012, we didn’t simply use the existing template as ‘cookie cutter’ for the new transaction.
Instead, we leveraged our in-depth knowledge of the latest regulatory developments in China and managed to extend the tenor from 12 to 24 months, and tighten the structure by adding legal assignment of advance payment guarantees issued by two Chinese banks [ICBC and Bank of China],” explains Frank Wu, Deutsche Bank’s regional head of structured commodity trade finance, Asia Pacific.
The deal was launched against a backdrop of significant challenges faced by China’s steel industry, such as overcapacity, declining profitability and structural slowdown in the consumption growth.
“Thanks to the seamless co-ordination between Tangsteel, Duferco, 11 international lenders and two Chinese banks, the deal was closed on schedule, and was oversubscribed at a record-breaking US$800m,” Wu adds. He believes that the structure of the deal has the capacity to become one of the “most legendary” recurring deals in the structured commodity trade finance space.
Putting securitisation on the map
Amount: US$1bn
Arrangers: Citi, Santander
Bookrunner: Morgan Stanley
Date signed: December 2013
While there were many notable transactions in 2013, the year will arguably be remembered for the novel securitisations which emerged, as a series of banks devised innovative ways of getting debt from their balance sheets. Indeed, since Basel III was announced, banks have been trying to think of ways to absorb its regulations by involving the capital markets.
Trade MAPS was the first multibank securitisation of trade finance loans. It demonstrated a collaborative bent which showed that securitisation can be harnessed by an industry as a whole to make sure the trade finance market stays funded.
Speaking on that note, John Ahearn, Citi’s global head of trade tells GTR: “The programme is designed to benefit the broader industry by establishing an origination and funding platform for trade banks with global market positions, creating a highly-diversified and granular pool of assets ultimately translating into access to a new and wider investor base.”
The loans that were repackaged were sourced on a 50-50 basis by Citi and Santander, with Morgan Stanley joining the transaction as structuring agent and joint-bookrunner. The deals have an average tenor of 47 days and value of US$10mn. Along with the other solutions launched in 2013, Trade MAPS shows the growing appetite among institutional investors to invest in assets as secure as trade finance loans. While the loans themselves are short-term, the security is longer-term, which offers security to the debtors too.
In some ways, it is natural that securitisation be factored out to include more than one bank. Trade is after all the most collaborative area of finance. “Even from the simplest instrument, an LC, you have a bank on each side,” says Jorge Tapia, global head of trade, commodity and export finance at Santander. “That’s a very simple transaction – it’s in the DNA of the industry.”
Armenia digs deep
Borrower: Zangezur Copper Molybdenum Combine (ZCMC)
Amount: US$150mn
Mandated lead arrangers: BNP Paribas (sole co-ordinating MLA and bookrunner), Caterpillar Financial, Commerzbank, UniCredit
Participating banks: DZ Bank, Raiffeisen, Banque Cantonale de Genève
Law firms: Linklaters; KPMG
Tenor: 4.5 years with six-month grace period
Date signed: September 23, 2013 (closed and disbursed three days later)
Last year, mining company ZCMC became the first Armenian business to launch and successfully close a syndicated deal in the international loan market.
The deal attracted interest from a variety of players familiar with the mining industry, and although drew in a massive (undisclosed) oversubscription, was eventually scaled back.The senior secured pre-export finance facility will be used to refinance existing debt and capex, and for other general corporate purposes.
ZCMC is the country’s largest mining company, producing copper and molybdenum concentrate, and has been in operation since 1952. It is majority-owned by the German Cronimet group, international specialists in stainless steel scrap, ferroalloys and primary metal products.
“We see this deal as an important development for ZCMC and Armenia as a country which has a lot of potential in the mining sector,” says Andrey Batioukov, director, structured debt, metals and mining at BNP Paribas, the mandated lead arranger of the facility.
Over the last few years, Armenia has made a number of legislative and regulatory changes to progress its business environment and attract international investors to its extractive sector.
Nevertheless, bottlenecks remain, and Batioukov tells GTR that one of the biggest challenges on the facility was attracting lenders for the 4.5-year tenor. “But despite a very limited track record on Armenia, the international lenders appreciated the strong profile of the company, its positive development over the last years and ability to meet the requirements of the international banking community,” he says.
“In addition to a good security structure, special attention was put on the environmental and social corporate responsibility matters, in line with the international standards, as part of the due diligence process as well as ongoing monitoring of the facility.”
