Each year, GTR’s editorial team selects the market’s Best Deals from the previous 12 months. The winning deals are chosen from submissions sent to GTR, and feature a mix of trade, commodity, supply chain and export finance and fintech transactions. Congratulations to those behind these 12 deals, which were chosen as the top transactions from 2018.
Bridging the gender lending gap in Paraguay
- Deal name: Banco Sudameris
- Borrower: Banco Sudameris
- Amount: US$101mn (Citi facility: US$7.8mn, Opic facility: US$94mn)
- Lenders: Citi (global co-ordinator, lead arranger and facility agent), Opic
- Law firms: Gross Brown; White & Case
- Tenor: 3 years (Citi facility) and 9 years (Opic facility)
- Date signed: September 2018
The gender gap in small business finance continues to be a worldwide problem, but is an issue that is now drawing more attention from financial institutions.
GTR has awarded this winning deal for its focus on supporting businesses led or owned by women. The financing, provided by the Overseas Private Investment Corporation (Opic) and Citi, supports Banco Sudameris with US$101mn for on-lending to small and medium businesses in Paraguay, with Sudameris committing to focus a percentage of it specifically for women-owned and women-led businesses.
The US$94mn Opic facility was funded via its ‘Certificate of Participation’ programme, where a note is placed in the capital markets and bought by investors.
The financing is delivered as part of Opic’s 2X Women’s Initiative, which was launched in March 2018. Through this project the organisation is seeking to invest over US$350mn and mobilise another US$1bn in capital to support enterprises that provide products or services that internationally empower women.
The project is expected to have a highly developmental impact on women-owned businesses by expanding access to otherwise unavailable long-term financing.
“Access to long-term financing for businesses in Paraguay is constrained, as most banks do not have long-term funding sources to match their portfolio risk,” reads the deal’s submission.
“According to the World Bank’s Enterprise Survey rankings of the top 10 obstacles to operating a business, access to finance was rated fourth in Paraguay. This same survey also highlights that while over 80% of large businesses in the country have a bank loan or a line of credit, just under half of small business have such financing.”
HSBC and ING bring blockchain-based LC beyond proof of concept
- Deal name: Cargill blockchain transaction
- Borrower: Cargill International
- Amount: US$1mn
- Issuing bank: HSBC
- Advising bank: ING
- Technology partner: CryptoBLK
- Date signed: May 2018
The exchange of paper-based documentation related to a letter of credit is typically a lengthy process. By utilising blockchain technology, this winning deal by HSBC and ING reduced transaction time from a standard five to 10 days, to just 24 hours.
It was the first live trade finance transaction to be executed on R3’s blockchain-based Corda platform, using an application called Voltron. Developed by CryptoBLK, Voltron uses blockchain to make the exchange of trade finance documentation digital and more efficient. This specific deal involved a cargo of soybeans exported from Argentina to Malaysia, with Cargill as the exporter and importer. HSBC issued the letter of credit, with ING acting as the advising bank.
The deal stands out not only for its ability to speed up a letter of credit transaction – others have done this in the past. But so far none of these projects have moved beyond the proof of concept stage.
The fact that HSBC and ING have brought Voltron, an application run by a consortium of eight banks, into a live setting is a significant step towards wider adoption of blockchain-based letters of credit and other trade finance documentation. It demonstrates that the technology is a commercially and operationally viable solution to trade digitisation, thus further laying the foundation for other banks to follow. In fact, as this magazine goes to press, several more transactions have been concluded using Voltron, now also implementing a digital bill of lading provided by Bolero.
“The feedback we got was very promising, and it convinced us that we were on the right track,” said Chris Sunderman, blockchain initiative lead for trade finance services at ING wholesale banking, speaking at R3’s CordaCon conference in September 2018. “One of the remarks the client, Cargill, made was that it was user-friendly and gave them fast information on where we all were in the process. That gave us a lot of energy to continue with the project.”
The aim is to bring about a production-ready solution in 2019.
UK government takes a tech approach to SCF
- Deal name: Crown Commercial Service
- Borrower: UK Government Framework
- Amount: £1bn of assets purchased in year one
- Lenders: Funded through Greensill’s network of investors
- Platform partner: Taulia
- Tenor: 30-day payment terms
- Pricing: Libor + 55 basis points
- Date signed: March 27, 2018
This winning supply chain finance (SCF) deal saw the UK government’s procurement organisation, Crown Commercial Service (CCS), adopt a technology-led framework agreement from Greensill, a global working capital finance provider. In doing so, the UK government replaced its previous, smaller-scale bank solution and provided a template for broader growth across the entire public sector.
The new £1bn-plus programme allows pharmacists who dispense drugs to be paid early, instead of waiting two-plus months for payment from the UK government.
Upon winning the deal in late March, Greensill needed to act quickly, as the previous bank-led scheme needed to be replaced within nine weeks of signing.
Greensill’s team successfully transferred more than 1,600 pharmacists to its scheme ahead of the deadline.
Greensill tells GTR that the framework has been so successful that CCS is currently exploring other areas where the UK government can implement SCF for early payment. The scheme could apply anywhere there is a government-approved cashflow.
“In selecting Greensill, the CCS made a conscious decision to move away from a bank platform to a fintech solution,” says a Greensill spokesperson.
“The previous programme had an adoption rate of about 11%, but Greensill is now in the process of growing this materially, as its fintech solution is able to reach far deeper into the pharmacy community than would have been possible with a traditional bank.”
A new spin on vanilla SCF in South Africa
- Deal name: FirstRand SCF
- Borrower: FirstRand Bank
- Amount: R1bn
- Lender: Rand Merchant Bank (RMB)
- Platform provider: Addendum (Propell)
- Date signed: December 2018
This pioneering supply chain finance (SCF) deal saw FirstRand Bank (FRB) become the first bank in South Africa to implement a fully automated SCF solution for its own suppliers. Even more compelling was the fact that the deal was structured by the bank’s own group: Rand Merchant Bank (RMB) and First National Bank (FNB).
As RMB (financier) and FNB (purchaser) are divisions of FRB, when RMB purchases invoices from suppliers for a discounted amount, the group is in effect early settling its suppliers at a discount.
To manage the ensuing VAT and accounting implications, RMB created a special purpose vehicle (SPV), which falls outside FRB but is still consolidated into the FRB group. South African Reserve Bank approval was required to create this entity and its creation neatly resolved many of the challenges. The legal framework and funding mechanism of the SPV also helped RMB achieve capital efficiency.
“This deal is a major first for South Africa, and while it may seem odd to enter a deal where we structured and advised our own group on a new structure, it gave us the opportunity to trial brand-new thinking and tech which is now market leading,” says Minos Gerakaris, RMB’s head of trade finance.
“The key feature of enabling small and emerging suppliers to better manage and access their cashflow at a competitive borrowing rate is compelling and fulfils a social and commercial responsibility,” he adds.
Gerakaris explains that, going forward, the SPV structure will ultimately enable groups with complex corporate structures to pass invoices between divisions or onto their bankers. There is also an option for application to other banking clients in Africa, trading companies, and South African corporates. The new structure is currently being marketed to a number of large South African corporates who like the concept as a “refreshing new spin on vanilla SCF invoice solutions”, which Gerakaris says haven’t gained much traction with large groups and holding companies.
Banks and ECAs team up for Argentinean wind power
- Deal name: Genneia
- Borrower: Genneia Vientos Argentinos, Genneia Vientos del Sur
- Amount: US$131mn
- Mandated lead arrangers: CAF, EKF, FMO, SMBC
- ECA: EKF
- Law firm: White & Case
- Tenor: 15 years
- Date signed: June 2018
As the Argentinean government targets a huge increase in its renewable electricity mix to 20% by 2025, its RenovAr renewal energy auction programme has led to a flurry of activity.
Genneia, the largest local renewable energy player in the country, was awarded two projects in the first round of the auctions, for which it signed dollar-denominated power purchase agreements with the wholesale market operator Cammesa in January 2017.
The ambitious projects, the 50MW Villalonga facility in the province of Buenos Aires and the 28.35MW Chubut Norte in the province of Chubut, had a total cost of US$174mn, including two different turbine supply agreements with Danish firm Vestas, which will also perform operation and management services.
Argentinean engineering firms Milicic and Distel provided the balance of plant services during construction for Villalonga and Chubut Norte, respectively.
The works were made possible by a complex 15-year US$131mn facility distributed along three tranches. The deal brought in Denmark’s export credit agency EKF, which provided the majority of the senior debt, along with Dutch development bank FMO and Latin American development bank CAF, which participated with long-term uncovered loans.
Japanese bank SMBC provided long-term financing under an EKF cover facility and acted as global co-ordinator, mandated lead arranger and inter-creditor for the deal.
This transaction is the first long-term, fully amortised, non-mini perm commercial project finance in Argentina. In addition, it is the first project finance deal in Argentina to include development banks, a commercial bank and an ECA among the lenders – which is an extraordinary feature even in more mature markets.
In yet another first, the deal was also the first portfolio financing to be carried out within the RenovAr programme.
Denmark’s EKF backs world’s largest wind financing deal
- Deal name: Hornsea Project One
- Borrower: GIP III Jupiter
- Amount: £800mn-worth of ECA-backed facilities
- Lender: Citi
- ECA: EKF
- Law firms: Allen & Overy; Clyde & Co; Watson Farley & Williams
- Tenor: 18 years
- Date signed: November 15, 2018
This deal saw Denmark’s EKF sign an £800mn guarantee for Hornsea Project One in what it says is the largest wind financing that any public export credit agency has ever provided.
Citi acted as the sole arranger and sole initial lender for the ECA-backed financing, which is split evenly between an EKF-guaranteed bank loan and a guaranteed institutional loan, with the latter being distributed to several blue-chip institutional investors.
The deal involves a two-year draw-down period and an 18-year payback period.
Located in the North Sea, off the coast of Yorkshire in the UK, Hornsea One is currently being constructed by Danish wind farm developer Ørsted, formerly Dong Energy.
The firm originally had full ownership of the farm but has since signed an agreement to sell a 50% stake to GIP III Jupiter, a subsidiary of Global Infrastructure Partners (GIP).
The total £3.6bn financing package for the acquisition was split between £1.3bn in private placement, £1.25bn in bank financing, a £250mn mezzanine tranche, and the two ECA-backed facilities.
When in commission in 2020, the 1,218MW plant will be the world’s largest offshore wind farm, Ørsted says.
“Offshore wind parks have become so large and the financing so complex that it requires participation from several financial players. EKF participates in the financing by covering a part of the banks’ risk,” says EKF deputy CEO Christian Ølgaard about the project, which he explains has involved “millions of pounds in loans, complex financing deals, a host of financial players and long debt tenors of up to 18 years”.
Ørsted will construct the wind farm under a full-scope EPC contract. It will also provide long-term operations and maintenance services and a route to market for the power generation from Hornsea.
The wind farm consists of a total of 174 turbines provided by Siemens (SWT-7.0-154 with a capacity of 7MW).
HSBC provides Brexit-proof supply chain solution
- Deal name: Nidec
- Borrower: Nidec Corporation
- Amount: €50mn
- Lender: HSBC
- Tenor: 120 days
- Date signed: February 2018
This deal represents one of the first of what will undoubtedly become many Brexit-proofing strategies employed by those with supply chains that cross the English Channel. In this instance, Japanese motor manufacturer Nidec – which has a €2bn supplier spend in Europe – sought a way to improve its working capital position by moving its supplier payment terms from an average 60 days to 120 days.
Nidec’s primary requirement was to provide a fast supplier onboarding process with a Brexit-proof element that would allow the manufacturer to migrate from the UK to a European booking centre in the future if needed.
Previous attempts to run a supply chain finance (SCF) scheme in Germany and Italy with one of Nidec’s Japanese banks had failed. As a result, Nidec selected HSBC, due to its extensive SCF network, to facilitate the process. HSBC faced fierce competition from the major Japanese banks for the business.
HSBC was attractive due to its ability to maintain its trade services by leveraging its thorough network in the UK and its euro area entities in France, Germany, as well as
the wider European Economic Area.
The project involved a phased implementation for Nidec’s largest buyers in Germany, Italy, France and Spain, with the first supplier going live in mid-February. In addition to the strict deadlines, there was a significant challenge relating to a requirement to align with German law and language for legal documentation and marketing assets.
HSBC also provided a cloud-based treasury solution to implement a ‘payment factory’ for all Nidec’s European subsidiaries. This allows buyers to automate funding and significantly reduce manual processing and delays.
It allows suppliers to be paid early in exchange for a discount or financing fee at a lower cost than they could achieve elsewhere, thereby improving their working capital position and enabling them to increase production efficiencies and drive growth.
The SCF solution enabled Nidec to significantly improve its days payable outstanding by standardising payment terms to 120 days whilst retaining the support of its major European and Asian suppliers.
A landmark restructuring deal for Noble
- Deal name: Noble Group
- Borrower: Noble Group
- Amount: US$700mn of trade and hedging facilities; US$3.5bn restructuring transaction
- Fronting banks: Deutsche Bank, ING
- Law firms: Akin Gump; Allen & Overy; Clifford Chance; Kirkland & Ellis
- Date signed: December 20, 2018
Many said it couldn’t be done, but the financial restructuring of and consequent trade finance facilities for Noble Group, once Asia’s largest commodities trader, marks one of 2018’s most impressive deals.
Due to the very wide range of creditors involved and the global scale of Noble’s business, the restructuring is arguably the most complex ever completed in Asia. Legal firm Allen & Overy advised ING on a US$3.5bn financial restructuring, which was primarily implemented through parallel schemes of arrangement in England and Bermuda and a corresponding Chapter 15 recognition process in New York, with ING entering into bilateral arrangements with Noble.
As a result, ING was the sole original lender to recover all of its exposure under a US$50mn-plus revolving credit facility made to Noble prior to its restructuring.
As trade finance facilities are normally provided on an uncommitted basis, providing committed facilities to New Noble, as the post-restructured entity is known, was a formidable challenge from both a commercial and legal perspective.
As advisor to ING, Allen & Overy put together an innovative structure that allows a trade finance bank to front on behalf of financial institutions such as hedge funds that would not normally have the ability to participate in facilities of this type.
This new facility represents a rare example of a distressed company being able to gain access to committed trade finance facilities. In addition, the originality of this structure opens the door to different types of capital providers to participate in trade finance facilities that were previously only the domain of banks and other more traditional financial institutions.
Cesce breaks financing records in Peru
- Deal name: PetroPerú
- Borrower: PetroPerú
- Amount: US$1.3bn
- Mandated lead arrangers: BBVA, BNP Paribas, Citi, Deutsche Bank, HSBC, JP Morgan, Santander
- ECA: Cesce
- Law firms: Allen & Overy; Echecopar
- Tenor: 13 years
- Date signed: January 31, 2018
Getting a deal with a state-owned oil company over the line in times of political turmoil – Peru has had three different governments in four years – is no mean feat. When that deal represents Spanish export credit agency Cesce’s largest-ever financing, as well as the largest-ever financing arranged by any ECA in Peru, it deserves an award.
This US$1.3bn export finance deal finances the Spanish content of the total US$2.7bn engineering, procurement and construction commercial contract executed by Spanish firm Técnicas Reunidas, as part of the US$6bn modernisation of PetroPerú’s Talara refinery.
The works will result in a boost in crude oil production capacity from 65,000 to 95,000 barrels per day, and include the installation of conversion units that will allow cleaner fuel production in order to comply with local environmental policies.
With Deutsche Bank acting as administrative agent as well as initial mandated lead arranger along with Santander, BBVA, BNP Paribas Fortis, Citi, HSBC Securities and JP Morgan, a US$1.3bn buyer credit was signed with Cesce, which allowed the lenders to provide fixed-term financing, locking in the rate during the negotiation period. Because this deal was closed at a time when US rates rose, PetroPerú has also benefited from relatively cheap funding.
The remainder of the project costs will be covered by a US$2bn bond, issued by PetroPerú two years ago, a planned issuance of a further US$1bn, as well as cash generated by the refinery.
In addition to breaking records, this transaction also paves the way for other potential ECA financing for much-needed transmission lines, energy generation facilities and airports in the South American country.
Reliance Group lands US$1.5bn ECA-backed finance across two deals
- Deal name: Reliance Group
- Borrower: Reliance Group (Reliance Industries and Reliance Jio)
- Amount: US$1bn (Sace facility); US$500mn (K-sure facility)
- MLAs for Sace facility: BNP Paribas, DZ Bank, First Abu Dhabi Bank, HSBC, MUFG Bank
- MLAs for K-sure facility: ANZ, BNP Paribas, Citi, Commerzbank, HSBC, ING, JP Morgan, Mizuho, MUFG Bank, Santander
- ECAs: K-sure, Sace
- Tenor: 10 years (Sace facility); 10 years, nine months (K-sure facility)
- Date signed: August 7, 2018 (Sace facility), June 22, 2018 (K-sure facility)
Reliance Group, the largest private sector enterprise in India, made a splash in 2018 with two ground-breaking better-than-sovereign export credit agency-backed deals.
When Reliance Industries, the group’s flagship listed company, needed financing for planned capital expenditure needs, it reached out to HSBC, which, along with First Abu Dhabi Bank, MUFG, BNP Paribas and DZ Bank, put together a 10-year US$500mn-equivalent Sace untied push facility in US dollars and euros – all in the space of four months.
For Sace, the Italian ECA, the deal means it can promote increased participation of Italian companies, especially SMEs, in opportunities offered by Reliance Group’s ongoing and future capital expenditure plan.
This landmark transaction is the first Sace push facility concluded since the product’s inception. In a unique twist, the deal was structured with four tranches at different levels of Sace cover, ranging from 30% to 80% to accommodate different risk appetites from the participating banks, such that all in pricing for the company remained the same across each tranche.
As the push facility is untied and based on potential future engagement with Italian vendors, it differs from typical tied ECA-backed facilities where ECA support is for payments made for underlying contracts from that country. What’s more, a better-than-sovereign rating for Reliance negotiated with Sace resulted in the group paying a lower premium than applicable to sovereign-related borrowers.
Reliance Group’s other award-winning deal involved Korean ECA, K-sure, providing its largest deal in the global telecom sector – as well as its largest in India. This 95% covered buyer’s credit facility will support Korean exporters, including Samsung, for Reliance Jio’s 4G-LTE telecom network project across India.
The deal involved several mandated lead arrangers and lenders with both euro and US dollar tranches for a total financing of US$1bn. Once again, Reliance Group was tagged as better-than-sovereign by K-sure.
Tapping into the Expo 2020 opportunity
- Deal name: Route 2020
- Borrower: Department of finance for the government of Dubai
- Amount: US$2.52bn (US$980mn Bpifrance facility, US$440mn Cesce facility, US$1.1bn commercial loan)
- MLAs for ECA facilities: HSBC, Santander (Cesce facility agent), Standard Chartered (Bpifrance facility agent)
- MLAs for commercial facility: FAB (facility agent), HSBC, Intesa Sanpaolo, Santander, Standard Chartered
- ECAs: Bpifrance, Cesce, EDC, Kuke, Sace
- Law firms: Clifford Chance; Squire Patton Boggs
- Tenor: 16.5 years (ECA facilities) and 10 years (commercial facility)
- Date signed: January 2018
As Dubai gets ready to host Expo 2020 – the largest event ever staged in the Arab world – many firms, financial institutions and export credit agencies are tapping into the enormous opportunities that the event preparation offers.
The world fair, themed “connecting minds, creating the future”, is expected to attract 25 million visitors between October 2020 and April 2021, giving firms a place to display their ideas and inventions.
The event is currently one of the key drivers of development in Dubai, with government having already awarded billions of dollars-worth of contracts to thousands of companies.
This winning deal illustrates how export credit agencies and banks are taking advantage of this boom. It saw two fronting ECAs, three reinsuring ECAs as well as international and local banks come together to support the design and construction of Route 2020.
Route 2020, a US$2.8bn project, is a 15km and seven-station extension of Dubai’s red metro line to the Expo 2020 site in South Dubai, a 4.38km2 area dedicated to Expo 2020 events.
The multi-sourced, long-term financing package comprises two ECA-backed term loans worth a total of US$1.42bn. They were covered by France’s Bpifrance Assurance Export and Spain’s Cesce, and were both funded by HSBC, Santander and Standard Chartered. The Bpifrance-supported facility was further reinsured by Poland’s Kuke, Italy’s Sace and Export Development Canada.
They supplement a 10-year, US$1.1bn commercial facility signed in mid-2017 and funded by five banks – FAB, Intesa Sanpaolo, Standard Chartered, HSBC and Santander.
The intricate deal structure involved a complex, multi-jurisdiction transaction and is an “excellent illustration of how two fronting ECAs and three reinsuring ECAs can work together to fulfil their respective goals and deliver an innovative and competitive solution to the borrower”, reads one of the deal submissions.
Gambia’s groundnut sector benefits from Islamic finance
- Deal name: The Gambia groundnut
- Borrower: Republic of The Gambia with National Food Security Processing and Marketing Cooperation (NFSPMC)
- Amount: US$21mn
- Mandated lead arranger, lead arranger, bookrunner: The International Islamic Trade Finance Corporation (ITFC)
- Lenders: Banque Sahélo-Saharienne pour l’Investissement et le Commerce, Federated Investors
- Tenor: 12 months
- Date signed: November 2018
Islamic finance is playing an ever more significant role in bridging the trade finance gap in Africa.
One of the organisations facilitating this growth, the International Islamic Trade Finance Corporation (ITFC), has been increasing its focus on West Africa in particular as of late.
In this winning deal, the organisation combined Islamic structures to bring pre-export and import financing to the Gambia’s groundnut sector.
Being a major export product of the Gambia, the groundnut is the second-largest source of revenue for the country. The sector is estimated to impact the living conditions of 70% of the rural population as well as sub-sectors such as transport, warehousing and banking.
The ITFC proposed an innovative financing solution combining two Islamic principles: murabaha and wakala. This structure, the ITFC notes, enabled the NFSPMC to access funds early to purchase the raw groundnut directly from farmers and co-operatives on a cash basis. It helped the client to avoid costly bridge financing, while the farmers avoided having to sell off their production to intermediaries.
As part of the financing package, the ITFC also provided a technical assistance grant of US$384,693 to support the Gambia’s new ‘trade development programme for aflatoxin mitigation’. The programme seeks to eradicate the toxic fungus aflatoxin, which affects the quality of the groundnut and prevents the country from exporting its groundnut produce into some regions, including the European market.
An oversubscribed syndication evidenced the ITFC’s ability to mobilise funds on the international market and meant the deal was closed at US$21mn – up from an initial target of US$17mn.
The involvement of the ITFC has further given assurance to farmers that they will be paid on time and fairly. This consequently enhances motivation, and producers are now ready to allocate more land to the cultivation of groundnut.