As a testament to the multitude of deals that were signed in 2014, the GTR editorial team was flooded with hundreds of submissions for the magazine’s annual Best Deals awards – yet only 14 were shortlisted. In our selective approach, we compared transactions based on criteria such as amount, complexity of structure and market risk, and the trend that transpired through this year’s submissions was one of safety. Yes, a lot of deals were signed, but most of them were in known markets, with established borrowers, or using tried and tested structures – perhaps a sign of continued caution in ever more uncertain political and regulatory landscapes.
The 14 deals that stood out include large-ticket syndicated project financings in the power and renewables sectors, oil and gas refining plants, and innovative use of collateral in agri transactions.
Importantly, they show a willingness to take risks, as is the case in the KAR Power transaction in Iraq for example, which was signed amid growing threat from IS.
It is also worth noting that one of our winning deals showed outstanding social responsibility, helping to tackle AIDS and malaria in Africa.
ECAs are also very present in this year’s selection, with Russia’s Exiar entering the aviation market and Export Development Canada acting as a mandated lead arranger on the Gemini transaction.
Congratulations to all the winners!
First syndication for ABC Inco
- Borrower: ABC Inco
- Amount: US$140mn
- Co-ordinating bookrunners and MLAs: ABN Amro, Rabobank
- Lenders: Bank of China, BES Investimento Brasil, Hinduja Bank, HSBC Brasil, ICBC, Natixis
- Law firms: Allen & Overy; Santos Netos Advogados; NautaDutilh
- Tenor: 3 years
- Date signed: February 27, 2014
Having previously only worked with banks on a bilateral basis, ABC Inco used the syndication to increase its pool of lenders, gaining first-time support from two Chinese banks (ICBC and Bank of China), as well as Swiss-based Hinduja Bank.The agribusiness arm of the Algar Group, soybean crusher and trading company ABC Inco signed its first-ever syndicated pre-export finance deal in February 2014. As for any first syndication, the financing required strong co-ordination on the part of the arranging banks – namely ABN Amro and Rabobank.
“Considering that ABC Inco was out of the syndication market, some banks – with no previous relationship with ABC – were not familiar with the company’s history. In order to overcome this challenge ABC Inco supported the MLAs with detailed information about its activities. The information was provided to the invited lenders who were able to perform a solid analysis,” Leandro Almeida of ABN Amro’s agri-commodities team in Brazil tells GTR.
Another interesting aspect of this deal is its innovative collateral package: “It offers the possibility to combine inventories and CPRs [certificate of agricultural products used in Brazil to represent future delivery of soybean]. The mix floats according to crop evolution. However, even during the intercrop season, ABC Inco and the lenders agreed to keep a minimum of 30% in the form of inventories, which is not usual during the intercrop. It brings a substantial flexibility for the company but still gives the lenders a liquid collateral in the form of inventories,” Almeida adds.
Again, strong co-ordination was needed to build the collateral package, as some notaries were located in agricultural frontiers.
The deal was initially targeting US$125mn, but ended up oversubscribed, at US$140mn, demonstrating ABC Inco’s appeal on the syndication market.
Feed-in tariff success for EDC Burgos
- Borrower: Energy Development Corporation (EDC)
- Amount: approx. US$315mn
- MLAs: ANZ, BDO Unibank, DZ Bank, ING, Land Bank of the Philippines, Maybank Philippines, Nord LB, Philippine National Bank, Security Bank Corporation
- ECA: EKF
- Law firms: Clifford Chance; Herbert Smith Freehills; Picazo Law; Puno & Puno
- Tenor: 15 years
- Date signed: October 21, 2014
The project had been in development for several years, but only started construction – funded by equity – after the feed-in tariff regulation had been passed in 2012, ensuring its position for a first-come, first-serve allocation. This is the largest wind farm to be developed in the Philippines (at 150MW), but the EDC Burgos project financing stood out for a number of other reasons. The first wind farm project in the country to reach financial close, it was timed and co-ordinated meticulously to leverage the jurisdiction’s new feed-in tariff regime.
“This is a sign of confidence by foreign and local banks on Energy Development Corporation’s (EDC) ability to execute its wind power project despite the challenges in the race towards entitlement to the feed-in tariff,” says EDC president and chief operating officer Richard Tantoco.
But being in the early days of the new legislation also meant that the regime was still at risk of being modified, requiring constant monitoring and flexibility in arranging the financing.
Having secured the support of Denmark’s ECA EKF for a 15-year, US$150mn loan, the arrangers came up with a bespoke financing structure to accommodate the fact that construction was already in progress and initial loan funds were needed to reimburse equity, as well as separate US dollar (US$35.5mn) and Philippine peso (PHP5.6bn) tranches for international and local payments.
No offtake agreement was in place, meaning the loan had an element of corporate risk, and its eventual oversubscription demonstrated increasing lender appetite in the Philippines.
“Non-recourse project finance for a wind farm has not been seen in the Philippines, so this transaction was significant as it showed that international banks are prepared to take long-term risk in the jurisdiction,” says an ANZ spokesperson.
The project is scheduled to start operations early this year, generating 370GWh of electricity to approximately 2 million households in the Philippines and avoiding 200,000 tonnes of carbon emissions annually. The complex structure of the financing is expected to serve as a template for future renewables projects in the country.
Going local for pharma products
- Borrower: Cipla Quality Chemical Industries Limited (QCIL)
- Amount: US$41mn
- Lender: Barclays Bank Uganda and Mauritius
- Tenor: 90 days
- Pricing: average weighted pricing of 3%
- Date signed: January 2014
Africa is home to 80% of the world’s malaria sufferers and 60% of those living with HIV/AIDS. When circumstances hampered the supply of imported medication to treat these diseases, Cipla QCIL, a pharmaceutical manufacturing plant in Kampala, Uganda, decided to begin manufacturing affordable medication locally.This winning transaction combines all the facets that we like to see in a deal: a socially responsible angle together with ongoing bank support for a worthy client.
Barclays has been supporting the company since its beginnings in 2008: structuring the initial US$17.6mn capex requirement of the plant and US$5mn in working capital lines. These involved the issuance of letters of credit (LCs) to suppliers of raw materials used in the manufacturing of anti-malaria and anti-retroviral medications and advance performance guarantees (APGs) to the government of Uganda for the supply of drugs.
The Ugandan government through its agency, National Medical Store (NMS) and Cipla QCIL have a 10 year offtake purchase agreement that expires in February 2019.
In 2014 alone Barclays issued two APGs of Ush24bn and Ush25bn to NMS for the supply of drugs, and acted on various occasions as the collecting or presenting bank for imports of raw materials (including Nevirapine, Artemether, Zidovudine and Lamivudine) from India. The bank also provided an additional US$2.5mn term loan in January 2014. GTR understands that by January 2015 all term debt was fully repaid.
What’s more, in mid-2014, the Ugandan government revised its procurement regulations and advised that the changes would in effect see a much smaller need for APGs – which formed the largest portion of Cipla QCIL’s working capital. Within the next two months and for the first time, NMS experienced a delay in the settlement of invoices against supplies already made by CiplaQCIL. On the two occasions when NMS was unable to settle US$6mn in receivables on time, Barclays provided trade financing worth US$2mn and US$2.5mn until the payments were eventually received on account within 45 days.
The company plans to supply other East and Southern African governments that have similar purchasing and regulatory requirements for HIV/AIDS and malaria medication.
Banks and ECAs team up for mega renewables project
- Borrower: Buitengaats and ZeeEnergie
- Amount: €2.1bn
- MLAs: ABN Amro, BTMU, BNP Paribas, Bank of Montreal, Bank Nederlandse Gemeenten, Caixabank, CIBC, Deutsche Bank, Export Development Canada, Natixis, Santander, SMBC
- Lender: European Investment Bank (EIB)
- ECAs: EKF, Euler Hermes, Delcredere | Ducroire (member of the Credendo Group)
- Law firms: Allen & Overy; Clifford Chance
- Tenor: 17 years
- Date signed: May 14, 2014
With strong sponsors led by Canada’s Northland Power and Germany’s Siemens, the project was able to get support from three ECAs: EKF, Euler Hermes and Delcredere Ducroire, as well as €587mn of funding in three facilities from the European Investment Bank (EIB). Project Gemini is a 600MW offshore wind farm located 85km from the Dutch shore in the North Sea, and at €2.1bn, is also the largest-ever project financing for a non-hydro renewables transaction.
The project forms part of the Netherlands’ target of sourcing 4% of its final energy consumption through renewables by 2020, and as such benefited from a 10-year power purchase agreement with Dutch utility firm Delta, as well as monthly grants for 15 years under the government’s Sustainable Energy Production (SDE) subsidy regime.
The strength of the project is apparent in its debt-to-equity ratio (€700mn equity for a €2.8bn overall cost), the time it took to close the financing (five months) and the flexibility shown by ECAs in terms of tenor, with a soft mini-perm structure from year nine reducing the 17-year contract maturity to around 14 years under a base-case cashflow scenario.
This deal also demonstrates efficient co-ordination to bring 13 commercial and multilateral lenders from different jurisdictions together in three facilities, two of which involved EIB.
Finally, the project also managed to involve an institutional investor (Danish pension fund PKA), which provided “a significant piece of junior financing” according to Natixis.
“The project will be the largest operational offshore wind farm in the Netherlands, and the second largest in the world in terms of size and output. It will produce roughly 2.6TWh of renewable electricity, making it one of the most productive wind farms in the world. The structure brings together a wide range of banks from various continents together with multiple ECAs,” says an SMBC spokesperson.
Guaranteeing SA’s new railway system
- Borrower: Gibela Rail Transport Consortium
- Amount: R6bn (US$530mn)
- Initial MLA and facility agent: FirstRand Bank (acting through Rand Merchant Bank division)
- MLAs: Absa Bank, Standard Bank
- Law firm: Norton Rose Fulbright
- Date signed: May 8, 2014
The project is part of the PRASA’s aim of revitalising the rail industry, creating jobs and providing efficient and reliable public transport in the country. The programme will, over time, replace the ageing suburban trains in service in Pretoria, Johannesburg, Cape Town and Durban with 1,200 electric trains.South Africa’s railway industry received a much-needed boost in 2013 when the Passenger Rail Association of South Africa (PRASA) signed a contract with Gibela, a joint venture led by Alstom, to supply the country with 580 trains (comprising 3,480 coaches) to be delivered between 2015 and 2025. The total contract, worth R51bn, includes the construction of a manufacturing facility in South Africa to produce the trains. Gibela will also provide technical support and supply of spare parts over an 18-year period.
Winning a GTR Best Deal for 2014 is the R6bn guarantee facility, signed in May last year, which supports the entire master supply agreement concluded between Gibela and the PRASA. The transaction covers the full supply chain, from the initial import of the first trains from Alstom’s factory in Brazil (which will produce the first 20 trains while the local manufacturing plant is under construction), to the establishment of the new R1bn plant (in Dunnottar, some 50km east of Johannesburg, where the balance of the trains will be built) and the manufacture of the trains themselves. It also includes maintenance and service contracts related to the supply agreement.
GTR understands that there are four guarantees under the R6bn facility, led by Rand Merchant Bank (RMB): an advance payment guarantee that secures the working capital for the project; an economic development guarantee; a warranty guarantee and a technical support and spares supply guarantee.
Winning attributes of the transaction include the fact that this is the biggest performance guarantee facility (inclusive of the biggest single guarantee) ever concluded in Africa, and supports the largest single rail order in the world. It’s also the first multi-guarantor guarantee (signed by all three banks involved – RMB, Standard Bank and Absa – on a several basis) issued for the borrower, and quite possibly for the industry at large.
Santander UK drives it home
- Borrower: Home Retail Group (Hong Kong)
- Amount: £20mn
- MLA: Santander UK
- Tenor: 90 days
- Date signed: August 29, 2014
This was achieved by Home Retail retaining control of the percentage of the invoice that its suppliers are able to be paid in advance. The result is, for example, that 80% of an invoice can be settled early, with the remaining 20% paid at the usual maturity date. Should the normal business processes that Home Retail operates raise an issue with the invoice value in between the invoice date and the maturity date, Home Retail is able to adjust the retained portion of the invoice and thereby manage the risk it runs on the supplier.As supply chain finance progresses, so too do the models by which they operate, and last year Santander UK was responsible for a particularly innovative structure. Together with its client, the Hong Kong-based arm of Home Retail Group, it devised a way for Home Retail to offer early settlement to its suppliers through the bank, while Home Retail kept the ability to adjust for business issues as normal.
As such, this retention model offers suppliers early settlement and Home Retail some protection against any adjustments required to the original invoice value, creating a genuine alternative finance option for negotiation when discussing terms, beyond price.
GTR understands that the Hong Kong arm of Home Retail’s suppliers produce a wide range of goods including furniture, appliances and toys.
“Many of the suppliers find our offer of finance preferable to their own invoice discounting arrangements due to the competitive price we are able to offer them by basing our price on our client’s credit rating, not the suppliers themselves. That is also coupled with the low cost of funds in Europe vis-à-vis the base rate in China of over 5.5%,” says Alex Farrugia, head of supply chain finance UK at the bank.
“The successful outcome has been the result of a great team effort, among the relationship, sales and supply chain finance teams at Santander in both the UK as well Hong Kong. It has been a great achievement for Santander UK to prove its capabilities in a new market against strong local competitors but also to accommodate unique requirements for an important client such as Home Retail Group,” adds Cristina Tamsa, VP trade finance, Santander Global Banking & Markets.
Sukhoi SuperJet enters export financing market
- Borrower: Interjet
- Amount: US$415mn
- MLAs: Natixis, VEB
- Lenders: Deutsche Bank, Intesa San Paolo
- ECAs: Coface, Exiar, Sace
- Law firms: Dentons; Norton Rose Fulbright; White & Case
- Tenor: 12 years
- Date signed: January 29, 2014
Sukhoi Superjet 100 aircraft have been flying commercially in Russia since 2011, but this is the biggest international order the manufacturer has received and the first from a North American company, with 20 planes due to be delivered, and an option for 10 more. The US$650mn order Providing funding for the export of up to 20 of Russia’s Sukhoi SuperJet 100 (SSJ100) aircraft to Mexico’s Interjet airline, this deal puts the Russian company on the export finance map, and stands out as the first aviation export credit involving Russian ECA Exiar.
The $650mn order was placed in January 2011, and in June 2012 Interjet mandated Natixis and VEB to arrange export financing for 80% of the price of the first nine aircraft.
The loan, which involves multilateral export credit backing by Coface, Sace and Exiar on a loan from Natixis, Deutsche Bank, Intesa San Paolo and VEB, was agreed in December 2013 upon delivery of the fourth SSJ100 to Interjet. However, the bulk of the financing happened in 2014, as the additional five aircraft included in the deal were delivered, each with its own loan. The three aircraft delivered in 2013 before the deal was closed were also refinanced through the tripartite export credit structure.
In June 2014, Natixis and VEB were again mandated to arrange financing for the second batch of airplanes (11), with the same banks and ECAs set to get involved.
To date 12 planes are already in operation and another eight are due to arrive in Mexico in the coming months, demonstrating the deal’s resiliency in the face of Russia’s sanctions-related uncertainty.
It is also one of the first financing transactions 100% guaranteed by Coface for a regional aircraft – the French ECA previously limited its cover to 95% for such transactions.
“This first ECA financing was a major international landmark in our industry,” says Nazario Cauceglia, CEO of SuperJet international. “I am sure it will allow a vital boost for future international sales of the SSJ100. Offering our customers not just the most efficient aircraft in its class, but also a competitive financial package, is a key factor to the success of this new programme.”
Braving danger to support Iraq’s power supply
- Borrower: KAR Power
- Amount: €100mn
- MLA: Commerzbank
- ECA: Euler Hermes
- Tenor: 10 years
- Date signed: June 6, 2014
Phase 1 of the project for approximatelyTerrorism always makes headlines, but 2014 saw a new name show up in newspapers: Islamic State (IS). In the first part of the year, the group led an offensive that spanned across Syria, Turkey and Iraq, violently seizing control of various cities with the ultimate goal of capturing Baghdad, the Iraqi capital. And in the midst of this uncertainty, power company KAR succeeded in securing €100mn of financing from Commerzbank for the construction of the Khormala power plant located near Erbil, in the very exposed Kurdistan region.
640MW was already up and running, but Kurdistan households still suffered from regular power shortages, and the need for an upgrade
and capacity expansion was urgent.
The project benefited from a long-term power purchase agreement by the Kurdish regional government, and leveraged KAR’s existing relationship with German contractors Siemens and ABB.
But more importantly, this deal got the support of German ECA Euler Hermes. ECA-backed financing has been scarce in the country: Nexi, Jbic and Kexim were involved in a few projects in 2013, and US Exim’s last participation dates back to 2012. For Euler Hermes, this is the first large-scale financing guaranteed by the ECA
in the country since the Iraq war.
“Hermes had to amend its cover policy prevailing at that time. Cover based on corporate risk required an extra application with the Interministerial Committee (IMA), the decision-making body of the Federal Republic of Germany for Hermes-covers. It took us about half a year to obtain an in-principle Hermes approval, which retrospectively does not seem to be too long for such a difficult topic,” says Commerzbank head of structured export finance Kathrin Eich.
On top of reassuring deal participants about the IS threat – militants had seized control of Mosul and were rumoured to be on their way to Baghdad at the time of signing – the bank had to navigate a complex jurisdiction to ensure the enforceability of applicable documentation law in Iraq.
But now that the groundwork has been done, the bank is confident more deals of the sort will be signed in the country, and is already looking at a few other requests for long-term ECA financing.
Securitising for development
- Amount: US$2bn
- MLA: Crédit Agricole
- Guarantor: IFC
- Date signed: June 2014
In 2014, it was the term of the French bank Crédit Agricole to innovate, with its US$2bn Marco Polo credit risk transfer securitisation, undertaken jointly with the International Finance Corporation (IFC). While the other securitisations arguably stood out for courting interest from the bond markets, this one was notable in that it was undertaken with a development institution and stands to have a positive impact on the underlying economy.Securitisation has become a hot topic in trade finance, as secondary investors look to get involved in transactions which are relatively secure and offer steady yields. We’ve seen a number of significant innovations over the past few years, including some interesting developments from BNP Paribas and Commerzbank.
For the IFC, Marco Polo represented its largest structured finance transaction. It was also a first for the banking world – the maiden venture into mitigating credit risk across a variety of asset classes and borrower groups related to emerging markets. Naeem Khan, Crédit Agricole’s global head of trade finance tells GTR why the deal was so significant to the market:
“This transaction is the first one of its kind anywhere because of the mix of various innovations. It was the first time that a reference portfolio incorporated counterparty risk towards a wide variety of financial and real sector segments, the first supranational not solely driven by a return on investment objective, but also by serving the real economy,” Khan explains.
It also stood out because of the particularity of the assets, which related only to emerging markets and the specificity of the asset class – trade finance assets characterised by small sizes and short maturities.
Khan talks us through the challenges of putting together this solution: “This structure is challenging in the way that it concentrates several constraints, including the mitigation of credit risk across a variety of portfolio of transactions, the monthly replenishment of the portfolio, due to the high asset turnover in trade finance.” Also mentioned was the challenge faced in convincing investors to back such an unusual structure.
Facilitating West Africa’s port of call
- Borrower: Port Autonome d’Abidjan (PAA)
- Amount: €250mn
- MLA: Afreximbank
- Lenders: African Finance Corporation, Banque Atlantique – Côte d’Ivoire (BACI), Société Générale de Banque – Côte d’Ivoire (SGBCI)
- Law firms: Hogan Lovells; SCPA Dogué-Abbé Yao & Associés
- Tenor: 2 years
- Date signed: July 9, 2014
With this financing, PAA will finance the advance payment and related costs for dredging and widening the Vridi channel and for constructing a second container terminal and the roll-on/roll-off terminal required for the extension of the port. The EPC contractor for the project is China Harbour Engineering Company (CHEC). Abidjan’s port, one of the continent’s biggest in terms of volume of traffic, is set to be expanded thanks to a deal struck between Afreximbank and the Abidjan Port Authority (Port Autonome d’Abidjan, or PAA), the state-owned company responsible for managing the port.
Afreximbank acted as the mandated lead arranger on the facility, also lending €50mn. Other lenders included Société Générale de Banque – Côte d’Ivoire (€50mn), Banque Atlantique Côte d’Ivoire (€100mn) and the Africa Finance Corporation (€50mn).
The bridge loan is a two-year tenor facility with a bullet repayment at the end of the second year. Repayment is expected from proceeds of a long-term facility that the government has since arranged with China Exim.
Afreximbank recommended the deal for selection due to the project’s importance in enabling trade in Côte d’Ivoire and the West African sub-region.
GTR understands that the port has recently witnessed an increase in global traffic: in 2012 it recorded total traffic of 22 million tonnes, representing an increase of 30.5% from the previous period. Such growth has put pressure on current port facilities and led the Ivorian government to launch a modernisation and extension programme.
The new port facilities, scheduled to be operational from January 2018, will allow the port of Abidjan to accommodate vessels carrying up to 8,500 twenty-foot equivalent units (TEUs) instead of just 3,500 square foot today, and will have a trans-shipping capacity in excess of 2 million containers.
Gold Star for refinery
- Borrower: Star Rafineri AS (Star)
- Amount: US$3.29bn
- MLAs: BBVA, Banco Popular, BNP Paribas, BTMU, Caixa Bank, Crédit Agricole, Deutsche Bank, Garanti Bank, Intesa San Paolo, ING, Natixis, Société Générale, Santander, UniCredit
- Lenders: Korea Development Bank,
- KfW Ipex-Bank
- ECA direct loans: EDC, JBIC, US Exim
- ECA coverage: Cesce, K-Sure, Nexi, Sace
- Law firms: Allen & Overy; Vinson & Elkins
- Tenors: 15 years (commercial, uncovered portion) and 18 years (ECA direct and covered loans)
- Date signed: May 29, 2014
A lot has been written about the project, which has been praised for its many achievements: it not only represents the largest foreign investment in a single location in Turkey to date, but also the country’s largest long-term limited-recourse multi-source financing.The much-anticipated Star project financing for the development of a state-of-the-art crude oil refinery in Turkey was signed last year, and because of the groundbreaking nature of the transaction, GTR felt compelled to award it Best Deal status.
Star involves the largest and most diverse group of ECAs (six) and foreign bank lenders (15) in any project finance in Turkey. The tenor of these ECA facilities (18 years) is the longest possible allowed under the guidelines set out by the OECD – but also longer than any other tenor achieved for a refinery project globally.
The total project cost amounts to US$5.5bn, of which US$3.29bn is financed by debt. The debt facilities are split into US$2.69bn of ECA direct and covered loans and US$600mn of uncovered commercial loans.
The financing includes a number of special features that distinguish it from other refinery project financings: there is no completion guarantee (offset by the strength of the EPC contract), there is only a limited security package in place, and there is no long-term or standby offtake.
The financing structure incorporates important liquidity protection mechanisms against volatility in refinery margins, including a two-tier repayment schedule allowing the project flexibility in repayments and effectively provides for a capped cash sweep and a properly-sized volatility reserve account.
The project itself involves the construction and operation of a greenfield complex crude oil refinery in the Izmir region of Western Turkey. The refinery will be constructed by a consortium of players, including Tecnicas Reunidas (Spain), Saipem (Italy), GS Engineering (South Korea) and Itochu (Japan), with target for completion in 2018.
The refinery will process a range of crude oils, with a capacity of 10 million tonnes per year, producing high-value products such as diesel and jet fuel that will be sold in the domestic market. It will also supply naphtha to Petkim, Turkey’s sole petrochemicals producer, 81% owned by SOCAR.
Moldova comes to the fore
- Borrower: Transoil International
- Amount: US$155mn
- MLA: Société Générale
- Participating institutions: Banque Cantonale Vaudoise, Banque de Commerce et de Placements, Erste Group, EFA Dynamic Trade Finance Fund, Fimbank, IFC
- Law firms: Hogan Lovells; George Y. Yiangou; Sayenko Kharenko; Turcan Cazac, Poncet Turrettini Amaudruz, Neyroud & Associés;
- Tenor: 1 year
- Date signed: June 30, 2014
The IFC partnered with Société Générale to arrange US$155mn in pre-export financing for Transoil Group, the country’s primary agricultural company. Transoil is also one of Moldova’s top exporters, selling refined oil, vegetable oil, grains, flour and silo services across the Black Sea region and upstream to the Danube basin. This is a key source of foreign currency reserves for Europe’s poorest country. Over the past 12 months, fears have been mounting that Moldova would become the “next Ukraine”. Dissidents in the breakaway region of Transnistria became more boisterous in their wishes to join Crimea as part of Russia, while at the same time the EU spoke of fast-tracking Moldova’s ascension to membership with a view to keeping it out of Russia’s sphere of influence. An interesting time, then, to do business, which is why it was refreshing to see this large transaction submitted for a GTR Best Deal.
“As the first PXF deal of its kind concluded in Moldova, this deal will not only allow Transoil Group to consolidate its position as a critical player in the country’s agricultural sector, but will also provide a positive signal about Moldova to global markets. This facility could lead the way to additional similar deals to support agricultural production, processing, and exports that will help ensure regional food security and create new job opportunities for Moldova’s people,” says a joint statement from the IFC and Société Générale.
What might in more developed trade environments have been a relatively straightforward deal to structure became more complicated given the political situation in Moldova in 2014.
The dealmakers said: “The present political situation in neighbouring Ukraine created particular challenges for us to complete this facility, especially as a portion of the commodities covered are shipped out of southern Ukraine.”
Turkmenistan upgrades exports
- Borrower: Government of Turkmenistan
- Amount: US$2.5bn
- MLAs: Bayerische Landesbank, BTMU, Commerzbank, Credit Suisse, Deutsche Bank, DZ Bank, Hana Bank, Industrial and Commercial Bank of China, Industrial Bank of Korea, Intesa Sanpaolo, Kookmin Bank, Korea Exchange Bank, Mizuho Bank, NongHyup Bank, Shinhan Bank, Société Générale, SMBC, UniCredit, Woori Bank
- Participating bank:
- First Commercial Bank
- ECAs: JBIC, Kexim, K-Sure, Nexi
- Law firms: Allen & Overy; Kim & Chang; Medet
- Tenor: 10 years
- Date signed: May 29, 2014
Rarely do we hear of trade deals coming out of the hermetic nation – even more rarely are they as big as this. The government of Turkmenistan, through the State Bank of Foreign Economic Affairs of Turkmenistan, borrowed US$2.5bn Nestled between Afghanistan, Iran and Uzbekistan to the east of the Caspian Sea, Turkmenistan – known mainly, ironically, for its obscurity – is classic pub quiz fodder. But while many of its former Soviet counterparts rely on remittances and chequebook diplomacy for their economic security, Turkmenistan has vast energy riches and, thus, is fiercely independent. The fourth-largest natural gas reserves in the world help it keep its distance from Russia and it has, in recent years, been brokering stronger relations with China to the east.
from a comprehensive list of banks dotted all round the world, with a guarantee coming from the Korean and Japanese ECAs. The finance will construct an ethane cracker and polyethylene and polypropylene plant near Turkmenbashi area in Turkmenistan. The plant will help escalate the country from an exporter of raw energy to a country that sells a more refined product, in turn moving it up the value chain.
“The Turkmen government has plans to develop the petrochemical industry, which will establish it as a regional exporter of petrochemicals to Asia, Europe and Turkey. This deal makes that development possible, and we are proud to be enabling sustainable development through considered and appropriate financing. On the other side, new opportunities have been opened up for Korean and Japanese EPC companies in the region, enhancing their international competitiveness – so the greater significance of this deal to further trading counterparties and trade flows is evident,” says Deutsche Bank’s head of structured trade and export finance for Asia Pacific, Evert-Jan Zondag.
As the sole co-ordinating and structuring bank, bookrunner, facility and ECA co-ordinating agent, Deutsche had the challenge of pulling the finance together, which Zondag describes: “Not only was this a sizeable and complex deal to organise, entailing over 20 cross-regional banks and one of 2014’s largest Korean and Japanese ECA financing transactions, but it was also the first Korean ECA transaction in Turkmenistan.”
Power up in Vietnam
- Borrower: Vietnam Electricity
- Amount: US$910mn
- MLAs: DBS, HSBC, SMBC, Société Générale, Standard Chartered
- ECAs: Kexim, K-Sure
- Law firms: DFDL; Lee and Ko; Milbank, Tweed, Hadley & McCloy
- Tenor: 16.25 years
- Date signed: October 2014
HSBC’s director of capital and export finance in Hong Kong Laura Galvin speaks of the complexity of putting together a transaction as large as this in Vietnam: “There were many issues which were of ‘first’ in nature for ECAs and the borrower, such as Foreign Account Tax Compliance Act (FATCA) issues, environmental and social monitoring by independent consultant, etc. This resulted in delay of execution on account of extended negotiations among the parties.”Vietnamese power deals have become a staple in GTR’s Best Deals, with a series of mammoth deals over the past few years catching the eye. This year was no different. The giant Vinh Tan 4 project took in US$1.8bn in financing – amounting to one of the largest power investments in the history of Vietnam’s power sector. It achieved the longest tenor available for such ECA-backed deals, 16.25 years, door-to-door.
The project will require 75,000MW of installed capacity by 2020 – pumping much-needed power into the country’s network. It will also require around US$3.5bn of capex investment a year over the coming years, which should galvanise project spending in Vietnam.
Those who banked the deal say that it has the potential to be transformative for the Vietnamese economy. “VT4 is a milestone Vietnamese power project which was closed despite the challenging market. The 100% cover provided by Kexim and K-Sure helped attract significant interest from international banks for this project. Independent monitoring of the project will also result in strict compliance with international environmental standards and improves the overall credit profile of the project and the company,” says Prem Raj Suman of SMBC’s Asia deal team.