Credit Suisse has successfully arranged a US$865mn financing deal for the construction of part of Ethiopia’s railway infrastructure, GTR can confirm.
In one of the largest project financing deals in the African country’s history, the Swiss-based lender was mandated by the Ethiopian government as co-ordinating commercial facility arranger and export credit agency (ECA) lead arranger on the deal.
The financing is split into two tranches: a US$450mn uncovered tranche, with a maturity of seven years, and a US$415mn ECA-backed tranche with a maturity of 13 years.
In addition to Credit Suisse, Deutsche Bank, ING Bank and KfW Ipex-Bank also act as mandated lead arrangers under the deal’s ECA-backed tranche. The Swedish Export Credit Guarantee Board (EKN), Denmark’s Eksport Kredit Fonden (EKF) and Swiss Export Risk Insurance (Serv) are the ECAs backing the deal. Turk Eximbank, the Turkish ECA, has provided parallel financing of US$300mn for Turkish goods and services supplied to the project.
Director in the Central and Eastern Europe, Middle East and Africa financing group, in Credit Suisse’s emerging markets group, Edward Kelly, who was instrumental in arranging the deal, says that ECA participation was essential for securing a financing package with a component as long as 13 years.
“The challenge in a transaction like this one was to bring together all of the various financing parties, including the borrower, guarantor, various lenders and ECAs,” Kelly tells GTR in an exclusive interview.
Kelly confirms that local African banks participated in the syndicate of lenders contributing to the uncovered seven-year tranche, but the bank was unable to reveal which lenders took part. “We deal with many international, regional and local banks across Africa as part of our day-to-day lending business, and our African partner banks were important on this transaction,” says Kelly.
“This is a fantastic deal for Credit Suisse and one of the first truly internationally structured deals in Ethiopia, with lenders from Africa as well as Europe, the Middle East and the Americas.”
The financing will be used to build the Hara Gebeya railway project, which will run between the towns of Awash and Weldia, to the northeast of Addis Ababa: the country’s capital. Turkish contractor Yapi Merkezi Insaat ve Sanayi will design and construct the 389km line.
An important part of Ethiopia’s planned national railway network, Credit Suisse anticipates the project will be completed within three years, and will provide vital infrastructure, supporting the country’s ability to trade.
“Ethiopia has yet to fully reach its export potential,” Kelly tells GTR. “The real driving force behind the national railway strategy is to facilitate the movement of goods around the country with a view towards exports.”
According to Kelly, another portion of the railway, which will eventually connect Addis Ababa to ports on the coast of Djibouti, is already under construction and is approximately 50% complete.
“Not only are these railways vital for enabling the flow and movement of people around Ethiopia, which has a population of more than 90 million, but they also importantly connect the commodity-rich north of the country, with investment potential in mining and commodities like sugar, to outside trade routes,” adds Kelly.