Acting as sole arranger and lender, Deutsche Bank signed several structured trade finance loans valued at a total of €533mn with the Ministry of Finance in Angola throughout 2007. The deals form the latest part of a framework agreement signed in 2003 – a facility that started with an initial US$50mn line of credit with no ceiling limit.
In total, over €760mn in loans has been issued by Deutsche Bank. The loans have been used to finance various reconstruction projects in areas such as transport, infrastructure and health, supporting supply contracts from various European suppliers.
The projects are all evaluated on their individual merits, although the funds must be used to buy capital goods. Deutsche Bank normally finances 85% of the contract value, although Angola remains ‘off cover’ with all the major official export credit agencies (ECAs).
“We are particularly proud of this example of using trade finance techniques to get Angola back on the right financial path,” says Ignacio Ramiro, head of structured trade and export finance at Deutsche Bank in Madrid. “The framework allows for much needed imports of capital goods and lists the Ministry of Finance – as opposed to the National Bank – as the borrower.”
Indeed, another key contribution from Deutsche Bank in this project involved studies into the development and commercialisation of the Angolan banking sector.
“This is a key concern for the Angolan ministry of finance as they are very keen to modernise their financial sector,” says Ramiro.
“Deutsche Bank’s experience in emerging markets has been invaluable in developing a structure that addressed the roles of the National Bank, as well as attracting funding to assist the country’s reconstruction.”
And it appears that these efforts have yielded results. Angola has become much more stable economically since 2003, and the pool of liquidity available to the Angolan government has increased as a result.
“Some ECAs have announced that Angola is ‘back on cover’,” says Ramiro. “And though a return to ECA cover would be welcome, our framework has also encouraged other private sector support.”
The facility represents the first non-oil backed financing in Angola since the end of the civil war in 2002. And as the loans are not backed by oil-receivables, the Angolan government is left with the option of using oil assets to support oil development projects, rather than for more general reconstruction.
“The debt will be added onto the Angolan national debt,” says Ramiro. “This means that the assets are not security, which is a boost for Angola as it tries to advance up the financial ladder. The country still has a long way to go, but there is no doubt it is moving rapidly towards advanced emerging market status. And I am particularly proud of Deutsche Bank’s role in helping break the financial log jam.”
Ministry of Finance, Angola
Mandated lead arranger: Deutsche Bank
Date signed: Throughout 2007