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In one of the year’s most high-profile project refinancings, Korea Gas Corporation (Kogas), the world’s largest importer of liquefied natural gas (LNG) completed syndication of a US$631mn facility, signed in December 2009.

The project financing involved four LNG carriers, Hanjin Sur, Hyundai Cosmopia, SK Supreme and K Acacia, each on bareboat charter (an agreement where a boat is hired with no crew or provisions included) to Hanjin Shipping Co, Hyundai Merchant Marine Co, SK Shipping Co, and Korea Line Corporation respectively.

Each vessel is owned by a single purpose company and is employed by the relevant bareboat charterer under a long-term contract of affreightment (an agreement whereby a ship-owner allows the charterer to carry their goods on his ship) with Kogas. Sponsor support for the project was provided by Kogas by way of letters of undertaking.

The loan facility for each vessel comprised a senior tranche constituting 80% of the facility amount and a junior tranche constituting 20% of the facility amount and is structured as a 10-year loan with a put option exercisable on the 5th anniversary.
Sumitomo Mitsui Banking Corporation (SMBC) led the syndicate as agent and security trustee, as well as acting as co-advisor (together with BNP Paribas and Société Générale) for the transaction.

“Whilst the structure of the transaction remains relatively simple and traditional, this important deal came to market at a challenging time and with a tight time frame,” says Charles Reineke, head of shipping, Asia for SMBC’s global shipping finance group.

“This deal is at the crossover point of project and asset finance and required some alternative analysis – notably when many of the lenders were ‘new’ partners. Achieving financial close was done through close cooperation and pragmatic compromise from all parties.”

The senior lenders comprised BNP Paribas, Chinatrust Commercial Bank, Crédit Industriel et Commercial, Natixis, SMBC, The Bank of Nova Scotia Asia, The Bank of Tokyo-Mitsubishi UFJ, Standard Chartered Bank, Société Générale, Intesa Sanpaolo, Mizuho Corporate Bank and Skandinaviska Enskilda Banken.

The junior lenders on the transaction included The Korea Development Bank, Standard Chartered Bank, Deutsche Bank and Fortis Bank (Nederland).

“This milestone deal was very well received by Kogas and it was a major breakthrough in the development of our relationship with the world’s largest LNG importer,” says Woon Khoon Kee, global head of structured finance, Standard Chartered. The bank took key positions in both the senior and junior tranches of the refinancing scheme, providing US$80mn and US$20mn respectively. “We look forward to developing this relationship, and supporting the company’s growth in the LNG industry,” Kee adds.

Watson, Farley & Williams (WFW) acted as lead counsel to the lenders and advised on the financing documents, the project documents and various sponsor support issues. Lee & Ko acted as Korean counsel for the lenders and Kim & Chang acted as counsel for Kogas and the bareboat charterers.

The deal was one of the highlights of 2009 with regards to finance in the shipping and energy sectors. Notwithstanding the difficulties encountered by financial institutions in 2009 and the transaction size of over US$630mn, the deal was also oversubscribed. The spread of financial institutions which participated in the transaction also gives evidence to the level of interest that this project generated in the market amongst the asset and project finance institutions.

Goh Mei Lin, partner at WFW in Singapore, comments: “We are delighted that we were able to play a key role in a high-profile transaction such as this and are very pleased that with our industry expertise and significant Korea experience, we were able to help the lenders, Kogas and the operators achieve a smooth and successful transaction.” time frame”.
Deal information

 

 

Sponsor: Korea Gas Corporation (Kogas)
Amount: US$631mn
Agent and security trustee: Sumitomo Mitsui Banking Corporation
Senior lenders: BNP Paribas, Chinatrust Commercial Bank, Crédit Industriel et Commercial, Natixis, The Bank of Nova Scotia Asia, The Bank of Tokyo-Mitsubishi UFJ, Standard Chartered Bank, Société Générale, Intesa Sanpaolo, Mizuho Corporate Bank, Skandinaviska Enskilda Banken
Junior lenders: The Korea Development Bank, Standard Chartered Bank, Deutsche Bank, Fortis Bank (Nederland)
Law firms: Watson, Farley & Williams (WFW); Lee & Ko; Kim & Chang
Tenor: 10 years
Date signed: December 2009