Related News

TDB moves to support women-led SMEs in Burundi with guarantee facility

MET Group signs new RCF, eyes debt capital markets

Côte d’Ivoire’s SIR financing highlights innovations in Africa’s debt markets

HFW boosts energy practice with partner hire

DNB grows London trade team with second ANZ hire

Hybrid oil deal first for Gabon

In April 2008, oil firm Total Gabon raised a US$600mn hybrid structured facility to finance a portion of its exploration and development costs, including, and most significantly, in support of its major redevelopment programme of the 100%-owned Anguille offshore field, located 20km off the coast of Gabon.

The redevelopment programme is designed to increase the proven and probable reserves of the company by improving oil recovery factor from 13% to 23%. The development will also upgrade the existing facilities of the company, improve operating costs and allow a no-flaring policy by 2011 on the Anguille field. The total costs of the programme, up to the completion of all the works, are estimated at US$2bn.

The achievement of this US$600mn portion of the project is that the arranging banks managed to mix several financing techniques into an innovative hybrid structure that met the sponsor’s specific needs. It also features an unprecedented tenor of eight years for an upstream financing in an emerging country and it is the first financing of this scale in Gabon.

When Total Gabon first approached banks for a financing package, its main objective was to secure a long-term financing solution that matched the cashflow profile of the company, especially in the context of the long-term Anguille redevelopment. Yet they also wanted to avoid any restrictive covenants that would impair the operation of the company.

The resulting structure allowed Total Gabon its required level of flexibility to enable it to carry out its day-to-day business, yet at the same time the lenders have sufficient comfort regarding the development and political risks linked to the Anguille redevelopment.

As Olivier Musset, managing director of energy project finance in the Emea region at Société Générale CIB, explains: “The key to this innovative financing was recognising that, given Total Gabon’s strong desire for flexibility, no one type of singular financing solution would be satisfactory.

“Société Générale CIB consequently put together a tailor-made structured facility incorporating different elements of corporate finance, project finance, reserve-based finance and structured commodity finance under the form of a club deal to allow Total Gabon to attract a sufficient level of debt for its re-development project.

“In short, the commitment of and, even more importantly, as we are seeing in today’s financial environment, the quality of the sponsor coupled with the hybrid approach adopted will allow Total Gabon to continue and extend its excellent production performance in the Anguille offshore field.”

The tailor-made structure brought together corporate finance such as balance sheet covenants and limited restrictions on dividend distribution, as well as project finance which involves extensive due diligence and long drawdown periods. The transaction also drew on structured commodity finance techniques involving the pledge of rights under the offtake contract and reserve-based lending secured on financial covenants based on reserves.

Deal Information

Sponsor: Total Gabon
Amount: US$600mn
Mandated lead arrangers: BNP Paribas; Calyon; Fortis; ING; KBC; Natixis; SMBC; Société Générale Corporate & Investment Banking (financial advisor)
Law firms: Jeantet & Associés (sponsor); Orrick Rambaud Martel (lenders)
Tenor: 8 years
Date signed: April 2008