In September 2007, Citi successfully closed as sole mandated lead arranger a US$320mn limited-recourse financing in Algerian dinar, for Ciment Blanc Algerien. Proceeds will be used to finance the construction of a greenfield cement plant near Oran and related equipment imports from Denmark.

The project financing is raised entirely in local currency to mitigate currency risk and to support government objectives on foreign currency borrowings.

As such, the transaction not only represents the biggest project financing in Algeria raised entirely in local currency to date for a private sector borrower and one of the longest tenors achieved in local currency in the country, but also the first time EKF, the Danish export credit agency (ECA), has provided 100% cover in Algerian dinar – a non-convertible currency.

Both the EKF and commercial tranches are secured by a project finance security package, including pledge of assets and shares.

The deal is a landmark transaction for co-operation between public and private banks in Algeria and is one of the first private sector project financings in the country to involve a syndicate of public banks.

The financing successfully closed and was oversubscribed on September 10, 2007, despite unprecedented volatility in international financial markets. As a result it received wide and positive press coverage in Algeria.

The EKF tranche sees Citibank Algeria committing Ad2.805bn (US$39mn), BNP Paribas El-Djazair Ad1.438bn (US$20mn) and Société Générale Algeria Ad359.70mn (US$5mn).

The commercial tranche has the following participants: Citibank with Ad862.717mn, Crédit Populaire d’Algí¨rie (CPA) with Ad7.779bn, Caisse Nationale d’pargne et de Prevoyance Banque (CNEP) with Ad2.917bn, Banque Nationale d’Algerie (BNA) with Ad2.917bn, Banque de Developpement Local (BDL) with Ad1.458bn, Banque de l’Agriculture et du Development Rural (BADR) with Ad972.344mn, BNP Paribas with Ad287.572mn, SG with Ad503.252 and Arab Bank with Ad719mn.

“Given the limited depth of the local currency market in Algeria, the project financing involves for the first time a group of public banks,” says Paolo de Michelis, vice-president, fixed income capital markets, export and agency finance, at Citi. “This structure can be replicated going forward for other local currency projects in the growing Algerian market.”

Following the successful start-up and operation of two cement production lines of Algerian Cement Company in 2002 and 2004, Orascom Construction Industries of Egypt decided to continue its successful growth in Algeria and build a new greenfield cement plant near Oran, with a capacity of 0.5mn tonnes per year (mtpa) of white cement and 2.5mtpa of grey cement.

The plant is the first white cement plant in Algeria and only the second privately-owned cement company in the country.

Orascom Construction Industries provided equity and subordinated loans for the remaining portion of US$212mn of project costs.

As a greenfield project financing, the key risks include: project construction and completion; credit risk of the project company; and market risk in the cement market.

There are no offtakers in this project, so lenders essentially take exposure to the Algerian cement market. “This is mitigated by the strong market growth in the country – driven by the housing sector and infrastructure expenditure, and by the sponsor’s outstanding track record in Algeria with a similar venture,” adds de Michelis.


Deal Information

Borrower: Ciment Blanc Algerien

Sponsor: Orascom Construction Industries, Egypt

Project size: US$530mn

Amount: US$320mn in dinar equivalent

Split into:
i) US$64mn equivalent EKF-covered facility in local currency
ii) US$256mn equivalent in local currency commercial facility

Lenders: EKF facility: Citibank Algeria (MLA, agent and account bank); BNP Paribas; Société Générale Algeria
Commercial facility: Citibank (co-arranger); CPA (co-arranger); CNEP; BNA; BDL; BADR; BNP; SG; Arab Bank

Tenor: 8 years

EPC contractors: FL Smidth, Denmark; OCIA, Algeria

Date signed: September 2007