Trade Development Bank Mongolia (TDB) has raised the largest syndicated senior loan in the history of Mongolian banking.

The US$82mn facility has been arranged by and syndicated to a group of development and commercial banks.

The development tranche (‘A’ loan) is worth US$35mn and arranged by the Dutch development bank FMO. They were joined as a lender by International Investment Bank, a development bank from Russia.

On the commercial tranche (or ‘B’ loan), ING and TDB Capital, a subsidiary of TDB, acted as mandated lead arrangers (MLAs) and bookrunners. GTR understands that TDB Capital’s involvement was limited to leveraging the support of its international correspondent banks, rather than providing capital.

The ‘B’ loan is worth US$47mn and was syndicated to AKA Export Finance Bank, the Bank of Tokyo Mitsubishi-UFJ, VTB Bank (all MLAs), Commerzbank (lead arranger), Atlantic Forfaitierungs, MG Leasing Corporation and Chailease Finance (all arrangers).

The tranches have tenors of five and 3.5 years, respectively.

No specific sector has been officially earmarked to benefit from the finance (the official line is that it’s for ‘balance sheet financing’), but Alwin Kool, investment officer at FMO, tells GTR that he expects Mongolian SMEs to be the main beneficiaries.

“Mongolia’s mining exploration sector is the driver of the economy,” he explains. “But everything that’s supportive of that, leasing companies, transport companies, housing projects… everything else is being financed by banks such as TDB. It’s not directly the mines which are getting the finance, but the smaller Mongolian companies that benefit. TDB is one of the only corporate banks and is supportive of any economic development.”

FMO has close to US$300mn of open lines in Mongolia, making it the second most active DFI in the country after the EBRD.
And while financing SMEs is FMO’s main concentration, Kool says that it is considering getting involved in the Oyu Tolgoi copper and gold mining project, funding a small part of a massive consortium.

Oyu Tolgoi is to be the largest project in financial terms in Mongolia’s history, with costs estimated to top the US$10bn mark. But the closing of some of the main tranches of funding has been dragging its heels.

Majority sponsor Rio Tinto has been involved in numerous spats with the Mongolian government. In August, the miner was reported to be cutting 1,700 jobs from the project after a dispute with the government over revenue-sharing and the amount of jobs that were to be given to local people.

The government had previously announced that any project financing for Oyu Tolgoi needed to be approved by parliament, as it sought to retain some modicum of control over its development.

However, a number of bankers connected with the project have suggested to GTR that the debt should be finalised within a matter of months.

This magazine reported in May that export credit agencies and development banks had pledged US$1.95bn to the project and that in April, commercial banks had agreed pricing (Libor plus 3.4%) and terms on its contribution.

Overall, this segment of the financing is expected to be in the region of US$2.5bn.