Argentina forges a comeback  

In April 2006, Natixis and Citigroup successfully closed the most important financing realised in Argentina since the 2001 crisis and the biggest during 2006 – for Aluar Aluminio Argentino, Argentina’s sole aluminium producer. The two banks were joint mandated lead arrangers and bookrunners on the facility, which is structured to combine a seven-year amortising US$300mn pre-export finance tranche and a long-term US$256mn export credit.

“This is an extremely important deal for Argentina,” says Carole Macaire-Freynet from the metals and mining commodity finance team at Natixis. “It marked the end of a very challenging time for the Argentine economy and represents a normalisation of trade finance arrangements with Argentina since the 2001 financial crisis.”

Indeed, this deal has the longest maturity that any Argentine company has had to date and is the largest loan ever arranged for Aluar. The transaction allows for the financing of Aluar’s aluminium smelter at Puerto Madryn, with the objective of increasing its capacity by 120 KT per year, to 400 KT.

Natixis’s and Citigroup’s commodity finance teams structured a ground-breaking security package in the pre-export finance tranche, which benefits from both the collection account where export cashflows are directed, as well as further backing from a maximum US$160mn portfolio of AAA- rated Austrian bonds, pledged as collateral.

Under the secured export financing structure, Aluar commits to export aluminium to certain eligible clients who will be required to make payments for the aluminium purchases into an offshore collection account in New York in the name of the borrower but under control of the collateral agent and pledged for the benefit of the lenders.

The ECA tranche is split between a US$146mn Coface buyer credit and a US$110mn Hermes buyer credit, carrying a tenor of up to 12 years after construction. Both these parts are 95% covered by the respective ECA and benefit from the export security package put in place for the pre-export finance tranche.

The two tranches of the facility were syndicated to a number of other banks. The pre-export finance tranche was syndicated to WestLB, Société Générale and Santander – as lead arrangers – and KfW, BNP Paribas and Calyon – as lead managers. Société Générale was documentation agent and lender under the Coface buyer credit and KfW a lender under the Hermes buyer credit.

“Attractiveness of the structure and the Aluar credit resulted in highly competitive terms, including long tenor and attractive pricing,” says Valentino Gallo, managing director, global manager, structured trade finance, at Citigroup in New York. “Financing was oversubscribed and significant appetite remains in the secondary market.”

He adds: “As a result of the offshore receivables structure, both ECAs granted a premium discount of 30% and door-to-door tenors of up to 14 years. The ECA tranches achieved a longer tenor and lower pricing than was possible in either the bank or capital markets.”

Natixis was security agent for the whole facility and administrative agent of the Coface buyer credit, while Citigroup was the administrative agent of the pre-export finance tranche and the Hermes buyer credit, and collateral agent for the AAA bonds.

“Only through inventive and imaginative financing of this nature are companies such as Aluar overcoming the 2001 crisis and moving forward,” concludes Macaire-Freynet.


Deal information

Borrower: Aluar Aluminio Argentino
Amount: US$546mn
Split into:
–         Tranche A: US$300mn pre-export tranche
–         Tranche B-1: US$146mn Coface export credit
–         Tranche B-2: US$110mn Hermes export credit
Project size: US$855mn
Mandated lead arrangers: Citigroup, Natixis
ECAs: Coface, Hermes
–         Tranche A: 7 years
–         Tranche B: Up to 13.5 years
Law firms: Clifford Chance (lenders)
Date signed: April 2006