ABN Amro, Calyon, JPMorgan, Natixis and Rabobank closed a US$150mn financing for Aluar, Argentina’s primary producer of aluminium, in December 2007. The facility marks the continued strength of Aluar, and the wider Argentine economy.
The deal is supporting the second phase of expansion at Aluar’s Puerto Madryn plant, with the aim of expanding production from 410,000 to 515,000 tonnes per year. The first phase was financed in 2006 by Natixis and Citi, through a multi-tranche export credit agency-backed US$546mn transaction. The deal was the largest loan raised for the corporate at time of signing, and demonstrates the normalisation of international trade finance arrangements with Argentina since the country’s 2001 financial crisis.
In this latest transaction, Aluar has achieved another important milestone through achieving a far looser and less secured financing structure, indicating increased confidence in the borrower. The transaction also had to be structured to meet with new Argentine regulations, and features a relatively long tenor of three-and-a-half years for a corporate in Argentina. Repayment is due in bullet form.
The financing is repaid through the proceeds of the company’s exports, but it has not been secured on the assignment of offtake contracts. Instead, the deal has a more corporate finance structure, featuring a number of special obligations that must be fulfilled according to Argentine regulations.
“The unsecured, corporate structure combines with a collection account of offshore cashflows,” explains Daniel Currado, Natixis’s country manager for Argentina, based in Buenos Aires.
“Indeed, rather than including an assignment of offtake contracts, the documentation instead includes strict instructions to flow payments into a dedicated offshore account every six months.”
Also under the same regulations, the structure includes coverage on the collection account at 150% of the next debt service. And, for the first time in Argentina, each drawdown has a three-year tenor bullet, including up to six drawdowns during the six-month availability period.
“This innovative financing was able to be put into place under particular Argentine regulations due to Aluar’s great quality,” affirms Cyrille Sailly, associate director in the metals and minerals, mining and structured finance desk in the commodity finance department at Natixis.
Mandated lead arrangers: ABN Amro; Calyon; JPMorgan; Natixis; Rabobank
Tenor: 3.5 years
Law firms: Davis, Polk and Wardell (lenders); Marval, O’Farrell and Mairal (borrowers)
Date signed: December 2007