Deal information

Borrower: Bahia Specialty Cellulose
Amount: US$470mn
Mandated lead arrangers: Bradesco, Itau BBA, Santander, WestLB
Participating banks: Bladex, Banco Espirito Santo, Bancolombia, Cordiant, DZ Bank, Caixa Geral de Depositos, Israel Discount Bank, Fibonancci Master Fund, Federated Project & Trade Finance Fund
Law firms: Mayer Brown, Souza Cescon, Barrieu & Flesch
Tenor: 5 and 7-year tranches
Date signed: November 4, 2010


Santander and WestLB acted as bookrunners, joint lead arrangers and underwriters to successfully close a US$470mn pre-export finance (PXF) facility for Brazilian pulp producer Bahia Specialty Cellulose (BSC).

This is the first ever PXF for Bahia, which will be using the funds to finance pre-exports of dissolving pulp sold to off-takers by Asian trading firm company SC International Macao Commercial Offshore.

The loan attracted a combination of 13 banks and funds to the deal and will be repaid in quarterly amounts between November 2011 and November 2015.

Bahia is fully self-sufficient in its wood supply, with a strong focus on exporting to the Chinese market made possible by leveraging on the company’s Asian parent company, Sateri International Group.

The loan was oversubscribed by US$70mn, as Claudia Azevedo Krieger, head trade, export and commodity finance, Brazil, sales and structuring, and Jean Tournaire, global head of soft commodities at Santander, explain: “This secured pre-export facility was arranged by Santander and WestLB with an initial amount of US$400mn and, due to the success of the syndication, was finally increased to US$470mn. The initial conditions for this syndication were challenging with an incipient recovery of the market for Latin American corporate syndications and a client active in a niche market.”

Sara Pirzada, director of syndications at WestLB, echoes Santander’s bankers and explains some of the challenges involved with arranging a first-time deal of this size: “It’s a very niche sector, and the company is used to keeping information private because of the competition within the sector.

“When doing a transaction of this size, you need transparency and need to share a lot of information. That was certainly one of the challenges; because the company is a leader in its field it wanted to maintain a lot of confidentiality. On top of that, this is the first corporate deal of this nature for BSC. We have a long-standing relationship with the company. Given the success of this transaction, this opens up many avenues of financing and increased relationships for BSC.”

Santander’s Krieger and Tournaire add: “One of the key factors for success was the strong support of the trade and syndication teams of Santander and WestLB in Brazil, Asia and the US. Additionally, the banks needed to invest time in understanding the specialty cellulose sector for the Asian textile industry, but obtained comfort from the solid position of the company in this market.

“These features together with the interesting and unique model of the company which enjoys low production costs and a strong positioning in south-south flows from Brazil to Asia, made this deal attractive to Brazilian and international banks as well as international investment funds.

“The unique characteristics of the borrower, the fact that an Asian company tapped the international loan market through its Brazilian assets and the variety of investors in that deal made this facility a landmark for the Latin American market in 2010.”

Bahia went through an expansion in 2008 to increase its capacity from 115,000 tonnes to 465,000, making it the second largest dissolving pulp producer in the world, which at the time was financed by a project finance syndicated facility worth US$320mn.

As well as financing pre-exports, the new PXF has gone towards refinancing the 2008 project finance facility.