Santander and Citi successfully signed a US$262mn buyer’s credit facility for the state-owned Brazilian oil company Petrobras in mid-2009.

Petrobras is a well-known borrower in the trade and export finance market, but what makes this deal unique is the involvement of the export credit agency (ECA) of Denmark, Eksport Kredit Fonden (EKF), and the innovative and flexible application of its untied export cover.

EKF provided 100% cover not only for political and commercial risk, but also for principal and interest. Irrespective thereof, the cover did not require the financing to be linked to any specific contract with Danish suppliers.

“This effectively meant that, for the debtor, paperwork and underlying contractual aspects were kept to a minimum, thus adding a flexibility which is not common in regular ECA facilities,” comments José Luis Vicent, executive director, head of export finance Iberia, Italy & Nordic countries at Santander.

Bringing an ECA onboard was essential for the MLAs to provide an 11-year tenor with competitive pricing.

The deal underscores the concept of national interest rather than national content driving a transaction.

EKF entered in the deal on an untied basis not to support a specific contract, but rather to help consolidate and strengthen existing relations between Petrobras and strategically important Danish suppliers.

Although the untied and flexible nature of EKF’s cover may well have sped up the conclusion of the deal, the cross-border nature of the transaction still presented some additional challenges.

Luis Vicent comments: “The key challenges in the structuring included the environmental screening conducted by EKF and the bespoke structure designed to suit Petrobras’ funding needs, which called for a tight legal framework involving Dutch, Danish, Brazilian and New York laws.”

Valentino Gallo, Americas head, export and agency finance group, at Citi, comments: “By facilitating the funding for a highly rated and established company with large capex plans like Petrobras, EKF is helping Danish exporters to win new contracts and increase economic growth, with little risk for the national budget.”


Deal information

Borrower: Petrobras
Amount: US$262.49mn
Mandated lead arrangers: Santander, Citi
Law firm: Allen & Overy
Tenor: 11 years
Margin: 125 basis points
Date signed: August 28, 2009