Santander closed a US$400mn pre-export finance facility for Chilean copper producer Codelco in mid-2009, a deal which marked the largest medium-term bilateral trade finance loan ever raised by a Chilean company to date. Santander acted as the sole arranger of the entire transaction.

Alejandro Espinosa, global relationship manager for Codelco at Santander Chile, says: “The size of this bilateral facility is yet another demonstration of Santander’s commitment to its relationship with Codelco and the ability to make its balance sheet available to our key clients.”

Before the credit crisis dramatically pushed up pricing, Codelco had been able to raise syndicated loans at very low rates. In September 2007, it raised a US$400mn seven-year facility via a syndicate of banks, priced at 12.5 basis points. Inevitably, with liquidity drying up globally, such low-priced financing was unavailable in mid-2009.

Codelco also had to struggle with falling copper prices last year, which dented its cashflow position. Copper prices on average fell from US$3.15/lb during 2008 to US$1.56/lb in the first quarter of 2009.

In order to refinance some of its short-term debt, Codelco decided to raise a longer term pre-export financing via Santander. A variety of reasons stood behind this decision, including that the 2.5-year tenor provided Codelco with comfort given the unstable market environment, and it fit well with its debt maturity profile.

The trade finance facility was also appealingly priced and tax efficient.

“Trade facilities were largely used by Chilean companies during 2009 as a stable source of financing during turbulent times,” says Manuel Garcia Matilla, from the commodity finance team at Santander in Madrid.

The Codelco deal does suggest that there was a return to favour for trade finance facilities among Chilean corporates last year, and this trend may well continue throughout 2010.

“The Chilean economy is sound and stable, and political risk is also very limited. Still, trade financing in Chile is favoured by clients looking to diversify sources of funding while achieving competitive pricing,” remarks Garcia Matilla.

Deal information


Borrower: Codelco (Corporacion Nacional del Cobre)
Amount: US$400mn
Mandated lead arranger: Santander
Tenor: 2.5 years
Law firms: In-house
Date signed: June 5, 2009