Eurocar drives up tenor in Ukraine
WestLB, as sole lead arranger and lender, successfully closed a multisourced ECA transaction totalling €52mn in favour of leading Ukrainian independent car producer Eurocar Group in November last year. The tenor (up to 12 years) is one of the longest in the Ukrainian corporate sector. Of the total amount, €42mn is being used for the financing of the import of German painting equipment, and €10mn for the import of Czech welding equipment.
The Eurocar Group has concluded three delivery contracts for forming, painting and transportation with German, Czech and Polish companies for the expansion of an already existing Skoda production line. The facility would allow annual production of up to 50,000 cars.
WestLB successfully introduced the Eurocar Group to Euler Hermes, the German export credit agency, and Egap, the Czech export agency, without additional collateral. Another smaller transaction with the Polish export credit agency Kuke is still in process.
The loan agreements for the German and Czech transactions were successfully signed, despite difficult negotiations during previous months.
Michael Sobl, executive director at WestLB, comments: “When the markets began turning in 2008, it was important that Eurocar obtained the ECAs’ cover on time. All parties worked hard at finalising this transaction within a very short period of time. Due to the fact that the transaction was closed at the end of 2008, Eurocar was able to save a good amount of money where ECA premium is concerned. “This is due to the fact that ECAs have since downgraded the country rating for Ukraine, and as such the ECA premium is now much higher.
“Additionally, this transaction is very important for the exporting companies as they may already have started to feel the consequences of the current market turmoil. If this financing had not materialised, it would have had a negative impact on the exporter’s side,” Sobl adds.
Due to the ECA coverage, the majority of the Ukrainian country and counterparty risk is mitigated. The deal relies purely on the financial performance of the Eurocar Group, and bears no additional guarantee of any third parties. This also means significant savings in legal and structuring costs.
Borrower: RIK Ltd (99% owned by Eurocar)
Mandated lead arranger: WestLB
Law firm: Beiten Burkhardt
Tenor: 12 years
Date signed: November 2008 (German export portion) and December 2008 (Czech export portion)