Natexis Banques Populaires and Citigroup have successfully closed a US$560mn multisourced structured financing for Aluar – Argentina’s sole aluminium producer.

Natexis and Citigroup were joint mandated lead arrangers and bookrunners on the facility, which is structured to combine a seven-year amortising US$300mn pre-export financing and a long-term US$260mn export credit.
The entire facility benefits from a common security package based on future aluminium exports to be paid by designated Aluar customers into an offshore collection account pledged in favour of the lenders and the ECAs.

In addition, the pre-export finance tranche offers an innovative security package – benefiting from both the collection account for the export cashflows, as well as further backing from US$160mn portfolio of AAA-rated Austrian bonds. These have been pledged as collateral for the entire tenor of such tranche (including the two-year grace period).

Such a mechanism provides the lenders with a “first-loss “protection with fluctuating margins depending on the percentage of collateralisation of the bonds. Natexis is acting as security agent for the whole facility.

The pre-export finance tranche has been successfully syndicated to a further six banks: WestLB, Soci&eaute;té Générale Santander have joined the facility as lead arrangers and, KFW, BNP Paribas and Calyon as lead managers.

The ECA tranche is split between a US$150mn Coface Buyer Credit and a US$110mn Hermes buyer credit – both 95% covered by each ECA and carrying a tenor of up to 12 years after construction.

Natexis is administrative agent of the Coface tranche while Citigroup is the administrative agent of the Hermes tranche.

Soci&eaute;té GénéraleCoface buyer credit, while KfW is a lender under the Hermes buyer credit with Citigroup.
The transaction will be used to finance Aluar’s expansion project for its aluminium smelter at Puerto Madryn, with the objective of increasing its capacity by 120KT per year to 400KT.

The deal represents a normalisation of trade finance arrangements with Argentina since the 2001 financial crisis, although it required a degree of innovation to make lenders and ECAs comfortable. It is the largest loan facility ever arranged for Aluar and the largest loan arranged in Argentina since the 2001 crisis.

“Aluar has been a relationship client of the bank since 1997,” says Dominique Fraisse, global head of the natural resources and related industries within the metals unit at Natexis in Paris.

“And Natexis retained close contacts with them throughout the crisis – perpetuating a dialogue about plans for expansion. These were finally decided by 2003. Once Aluar obtained all Argentinean authorisations, bids were launched by mid 2005, with the mandate obtained in November 2005 for a signature on April 25th 2006 – a reasonable arranging period considering the complexities of the transaction.”

“It is an original financing,” says Olivier Brunet, head of export finance at Natexis in Paris. “It combines the classic trade finance risk mitigation structures of pre-export financing and export credits. Both Citigroup and ourselves worked very hard on the structure- bringing in teams from Buenos Aires, New York, Paris and Frankfurt.”