Sole arranger BBVA signed a US$300mn buyer’s credit facility with the Indian Oil Corporation (IOC) in August 2007, setting a benchmark for future transactions with the borrower. The deal was the first bilateral facility to date to be closed between IOC and a foreign bank without any branch presence in India.
The deal was split into a US$200mn tranche signed in March 2007, and a US$100mn portion closed in August 2007. BBVA was the sole arranger and sole banker in the facility. The purpose of the financing is to support IOC’s import of crude oil with a tenor of up to one year.
The deal represents a major step in BBVA’s efforts to increase its presence in the Indian market.
The Asian market as a whole is becoming of increasing importance in terms of BBVA’s long-term outlook, and has over the last few years been expanding its presence across in the region. At the end of 2006 it opened a representative office in Mumbai with the aim of encouraging closer contact with the Indian marketplace.
“This is the first bilateral facility that BBVA has granted to an Indian corporate, setting a milestone for the bank in entering the Indian market, with a special focus on the leading corporate,” comments Grace Li, head of global trade finance-Asia at BBVA Hong Kong.
“BBVA has now become one of IOC’s leading core banks in supporting its crude oil import. The requirement for crude oil imports jumped significantly in India coupled with the increase in oil price, providing a good opportunity for BBVA entering into the market,” she adds.
India’s energy needs are soaring to meet the needs of its growing economy and according to the International Energy Agency, oil imports to India and its neighbour China will almost quadruple by 2030. Over the last two years, Chinese and Indian demand has accounted for around 70% of the heightened demand for energy.
With oil prices remaining high, and India’s own oil reserves remaining relatively unexplored, India’s thirst for crude oil is unlikely to be abated.
IOC is an integrated diversified energy company, and India’s largest company by sales. It announced at the start of this year an increase of 13% in gross turnover. It has a total turnover of approximately US$51bn, the highest to date for an Indian company.
Between 2006 and 2007, the group sold 57.97mn tonnes of petroleum products, including 1.63mn tonnes of natural gas and exports of 3.13mn tonnes. The group also owns and runs 10 of India’s 19 refineries, giving it a total refining capacity of 60.2mn tonnes per year.
IOC is also active in exploration and production, having control over eight oil and gas blocks, and two coal bed methane blocks in India, in consortium with other companies.
Indian Oil Corporation
Mandated lead arranger: BBVA
Tenor: Up to 12 months
Date signed: March and August 2007