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In June and July 2008, mandated lead arrangers BNP Paribas and Banco Bilbao Vizcaya Argentaria (BBVA) signed two long-term export financing facilities totalling US$550mn for Brazilian telecommunications company Telemar Norte Leste, trading as Oi. The dual-tranche financing package featured a US$250mn facility structured via Nordic Investment Bank (NIB) under an A/B structure, signed in July 2008. NIB provided the US$100mn 10-year A tranche on its own account, and BNP Paribas and BBVA funded the US$150mn seven-year commercial B loan.

This loan marked the first time NIB has used an A/B structure to support Nordic exports. “To this extent it was a ground-breaking transaction,” notes Tim Lamey, head of Nordic ECA origination and director of UK and Nordic export finance at BNP Paribas. “Providing the first A/B loan is an important step for NIB,” says Johnny Åkerholm, president and CEO of NIB. “We hope this new product will further strengthen NIB’s position in financing large-scale investment deals in the world’s growth markets, such as Brazil. The B lenders also benefit from this structure by sharing the advantages of NIB’s status as an international financial institution.” “Borrowing from NIB gives us an opportunity to raise long-term credit financing from a top-rated international financial institution,” adds José Luis Salazar, CFO and investor relations officer of Oi. A 10.5-year US$300mn export credit agency (ECA)-backed tranche was signed in June and was supported by Finnish Export Credit (FEC) and Finnvera.

BNP Paribas and BBVA were mandated lead arrangers (MLAs) on this deal, with FEC being lender of record and Finnvera covering 90% of the political and commercial risks. BNP Paribas’ Lamey adds: “For a variety of reasons, these facilities were required in a relatively short timeframe by Telemar. BNP Paribas and BBVA much appreciated the flexibility and co-operation of Finnvera FEC in relation to the US$300mn export credit facility that we extended.” Gavin Melluish, BBVA’s head of global trade finance UK comments that when putting together these transactions, several challenges were faced and surmounted by the MLAs within the short timeframe imposed by the borrower. First, Telemar was seeking finance for a series of contracts under which significant deliveries had already been made – for which availability of the buyer credit via the reimbursement mechanism was clearly an essential condition. Furthermore, the telecoms operator felt that, in those circumstances, it made sense from a practical point of view for the full tranche to be availed by reimbursement. “So, somewhat unusually, the MLAs sought and obtained the agreement of Finnvera and FEC to allow drawings by reimbursement even in respect of deliveries made after loan signature. Both Finnish institutions proved admirably flexible in this respect,” says Melluish. “What made the NIB loan special was the fact that it was this multilateral lender’s first ever A/B loan,” Melluish continues. “Without the benefit of NIB’s umbrella, it is inconceivable that the banks could have agreed to a seven-year horizon, in which case the attractiveness of the package to Telemar would have been severely diminished. “Congratulations are due to Finnvera, FEC and NIB for the innovative steps they took; and last but not least, to Telemar and Nokia Siemens Networks (NSN) for providing this stimulating opportunity.” Telemar is Brazil’s largest provider of fixed-line telecommunication services with over 14 million subscribers. This facility will finance the expansion of the company’s 2G and 3G mobile networks in the Sao Paulo region of Brazil. Telemar has concluded contracts with NSN for the supply of the telecom infrastructure equipment. International law firm Milbank, Tweed, Hadley & McCloy represented Telemar as the borrower, and Allen & Overy acted as international counsel to NIB.

Deal Information

Borrower: Telemar

Amount: US$550mn

Mandated lead arrangers: BNP Paribas; BBVA

Additional lender: Nordic Investment Bank

ECA/Insurer: Finnvera; Finnish Export Credit (FEC)

Law firms: Milbank, Tweed, Hadley & McCloy (borrower); Allen and Overy (NIB)

Tenor: ECA financing: 10.5 years; NIB A Loan: 10 years; NIB B loan: 7 years

Date signed: ECA financing: June 2008; NIB financing: July 2008