Banks pipe up for Interpipe
In April last year, joint mandated lead arrangers, Citi and Barclays Capital, successfully structured a US$531mn debt financing package for Interpipe, one of the world’s leading producers of steel pipes and railway wheels.
The package part finances a US$735mn 1.32 million tonne steel electric arc furnace construction project on terms previously unavailable to Ukrainian steel producers. The new steel mill is to be built in Dnepropetrovsk, eastern Ukraine, and remaining project costs will be met through project sponsor equity.
The debt financing, for which Barclays acted as advisor, comprises a US$344mn Sace-backed export credit facility and a US$187mn pre-export finance facility.
Barclays and Citi were appointed as joint mandated lead arrangers and underwriters for the export credit facility, with Barclays acting as sole bookrunner. Sace’s first-demand unconditional guarantee provides 85% of the loan, which is a very high level to be attained for a quasi-project financing deal. The facility has a maturity of 10.5 years – one of the longest tenors achieved for a Ukrainian project. Furthermore, it comes with an attractive, fixed-interest rate set at 3.48% for the life of the loan.
The pre-export finance facility featured Barclays and Citi as joint bookrunners and mandated lead arrangers and was syndicated to a group of 13 international banks with an oversubscription in excess of 50%. The pre-export finance facility has a four-year maturity and is priced at 2.25% over Libor. The facility is secured by deliveries of steel pipes under export contracts.
The entire facility represents one of the largest investments in the Ukraine since the country’s independence, says CFO of Interpipe, Oleksandr Cherniavskyi. “This transaction demonstrates the support of the international financial community for Interpipe and Ukraine. Interpipe has obtained competitive pricing and long tenors despite the difficult conditions prevailing in the international markets. The new debt facilities support Interpipe’s strategy to increase the vertical integration of its steel production.”
The facility is groundbreaking in that it marks the largest transaction made by Sace in the country to date. As such, it reflects the continuous growth of trading flows, particularly in the metallurgical sector, between Italy and Ukraine, says Fabio Fritelli, managing director responsible for global business at the Italian export credit agency.
“This financing reflects Citi’s commitment not only to a highly valued client, but also to the country’s development. We look forward to continuing a long-term relationship with Interpipe and hope to support the company with its future financing needs, given its extensive expansion programme,” comments Nadir Shaikh, Citi country officer for Ukraine.
“Barclays Capital is pleased to have had the opportunity to assist Interpipe in securing favourable financing terms from Sace to fund its new electric arc furnace. Export credit agencies represent a valuable new funding source for both government and companies to build projects vital to improving Ukraine’s transport and industrial infrastructure. We look forward to working on additional such financings in Ukraine,” comments Bob Mabon, Barclays managing director responsible for Ukraine.
Interpipe is an export-oriented company with 71% of its revenues derived from export sales in 2007, supplying products to 76 countries in the world. The company has a network of sales offices in Ukraine, Russia, Kazakhstan, Europe, the US and the Middle East.
Interpipe closed its first syndicated loan facility in the international loan market in 2007, securing a four-year US$100mn pre-export finance facility with a margin of 240bps via mandated leader arranger Commerzbank.
Borrower: Steel One
Mandated lead arrangers: Citi; Barclays
Tenor: 10 years door-to-door
Date signed: April 2008