Over the course of 2009, Barclays Capital arranged an umbrella ECA-backed framework facility to part-finance South African state transport company Transnet’s five-year R80bn (US$10bn) capital expenditure programme.

This marks the first-ever rand-denominated ECA funding for Transnet and the market.

As part of the umbrella framework facility, a total of five standalone deals were signed in favour of the transport company – all with repayment periods of up to 10 years. Four of these deals, worth a total value of R915mn (approximately US$118mn) are backed by Finnish export credit agency, Finnvera, with the fifth deal (worth R538mn) receiving cover from Dutch ECA Atradius.

Barclays Capital is the mandated lead arranger of the facilities, the proceeds of which will be used for the procurement of equipment for the ports of Durban, Ngqura and Cape Town, as well as a hopper dredger.

“This transaction is structured to provide an innovative multi-project, multi-supplier, multi-ECA framework solution that allows an unlimited number of ECA financings to be entered into over the life of Transnet’s capex programme by utilising a common framework,” explains Youngha Kim of the investment banking division – capex financing solutions at Barclays Capital in London.

As such, the facility is a landmark in that it incorporates fixed-rate rand funding for euro-based contracts, significant flexibility on the provision of foreign content cover, and a framework to accommodate other contracts going forward.

The deal provided a number of firsts for the Finnish ECA too. “This was the first larger transaction for many years that Finnvera has covered to South Africa and it was the first local currency guarantee commitment for Finnvera,” says Jukka Liimatainen, Finnvera senior adviser.

The transaction also marks Atradius’ first local currency lending cover provided for a loan to a borrower in an emerging market.

Marieke Nes, account manager at Atradius explains that the Dutch ECA was able to support Barclays by providing credit risk cover for their local currency loan, enabling a number of essential features of the deal that have been designed by Barclays to cope with the specific requirements made by Transnet.

These features include – among others – a long tenor of the loan and payments in euro in order to honour the contractual obligations of Transnet towards the Dutch exporter involved, while allowing repayments being made in South African rand.

According to Richard Wilkins, director of the investment banking division – capex financing solutions at Barclays Capital, the structure of the facility is exceptionally flexible in that it incorporates different ECAs while minimising the documentation and administration burden for the client.

It also allows for borrowing in different currencies – though Transnet’s preference is for rand because the majority of its revenues are in the South African currency.

“The facility also enables Transnet to achieve a competitive cost of funds without impinging on its bank lines,” Wilkins adds.

Chris Wells, Transnet’s acting group chief executive, comments on the success of the deal: “We are pleased to have leveraged the benefits of the ECA umbrella facility to secure competitively priced financing with long tenors.”

Deal information

Borrower: Transnet
Amount: R915mn & R538mn
Mandated lead arranger: Barclays Capital
Lending participants: Barclays Bank, Absa Bank
ECAs: Finnvera, Atradius
Law firms: Simmons & Simmons and Edward Nathan Sonnenbergs (for the MLA); Cliffe Dekker Hofmeyer (for the borrower)
Tenor: Up to 10 years post-delivery
Date signed: Finnvera deals: April 17, 2009; Atradius deal: November 24, 2009