In October last year, initial mandated lead arrangers and bookrunners The Bank of Tokyo-Mitsubishi UFJ (BTMU) and Morgan Stanley closed a US$900mn pre-export finance term loan facility in favour of special purpose vehicle Petroleum Export III (PEL III) as borrower, and the state-owned Egyptian General Petroleum Corporation (EGPC) as the exporter.

The deal marked Egypt’s first syndicated pre-export loan since the beginning of the financial crisis, and EGPC’s successful return to the PXF market, having issued a similarly structured transaction – based on export-backed notes issued to the capital markets – in 2005.

The facility was significantly oversubscribed by more than US$500mn, and lender commitments were scaled back.

A banker close to the deal tells GTR that the EGPC transaction came to the market at an opportune time for banks dedicated to oil finance – all of which had been swamped with Russian oil deals and starved of others. The source explains that as “Russian oil fatigue” was setting in, EGPC came up with a deal priced roughly the same as the last Rosneft – if not cheaper than the later Russian deals “and with a perfectly acceptable tenor and security structure. It was the right deal, with the right structure, at the right price, at the right time.”

BTMU was the facility agent and documentation agent, while Morgan Stanley acted as commodity hedging counterparty and physical offtaker. Mitsubishi UFJ Securities International (MUSI) was the lead interest rate swap arranger, and a share of the swap was then allocated to some of the MLAs through an auction process.

“We were delighted to have the opportunity to work with our alliance partners, Morgan Stanley, in jointly arranging this deal, and it showed how a partnership between an investment bank and a commercial bank can work well,” says Neil McGugan, head of structured trade finance for BTMU’s commodity & structured trade finance group.

Joining the deal during syndication as mandated lead arrangers were Banco Espirito Santo, Banque du Caire, BNP Paribas, Crédit Agricole Corporate and Investment Bank, Commercial International Bank, Deutsche Bank, HSBC, Natixis, Société Générale and WestLB.

“Being a core relationship bank for EGPC, Crédit Agricole CIB was obviously pleased to lend its support on this transaction,” says Sandie Hessing, head of MENA, structured commodity finance at Crédit Agricole CIB.

National Bank of Greece (London) joined as a lead arranger, while Ahli United Bank, Banque Misr, MediCapital Bank, and Pacific Investment Management Company joined as arrangers.

“This deal was unique in taking a secured bond structure, which EGPC had successfully launched in 2005, and adapting it to the structured commodity finance bank market utilising all of the elements of a traditional pre-export finance deal,” explains BTMU’s McGugan.

PEL III acts as borrower of record under the transaction, and is a special purpose vehicle established in the Cayman Islands. The proceeds of the facility are to prepay for crude oil deliveries from EGPC – the state monopoly for oil exploration and production in Egypt – based on a forward sale agreement (FSA) between the borrower and EGPC with a fixed monthly delivery schedule for crude oil. Crude oil deliveries are sold back-to-back to Morgan Stanley Capital Group under an offtake agreement.

The facility is for a tenor of 42 months with a three-month grace period. Repayment is made quarterly from cashflows generated under the offtake agreement. All cashflows generated under the offtake contract are captured in an offshore collection account pledged to the security trustee.

“This transaction is one of the few pre-export finance transactions closed in 2009 of any significant size. It was launched to the syndicated loan market, rather than arranged as a club deal, which was predominantly the case for most structured commodity finance transactions closed in the first half of 2009,” says Arvind Rajpal, head of EMEA commodity financing at Morgan Stanley.
Deal information

Borrower: Petroleum Export III (PEL III)
Exporter: Egyptian General Petroleum Corporation (EGPC)
Amount: US$900mn
Initial mandated lead arrangers and bookrunners: The Bank of Tokyo-Mitsubishi UFJ, Morgan Stanley
Mandated lead arrangers: Banco Espirito Santo, Banque du Caire, BNP Paribas, Crédit Agricole Corporate and Investment Bank (formerly Calyon), Commercial International Bank, Deutsche Bank, HSBC, Natixis, Société Générale Corporate & Investment Banking, WestLB
Additional lending participants: National Bank of Greece, Ahli United Bank, Banque Misr, MediCapital Bank, Pacific Investment Management Company
Law firms: Skadden Arps; Helmy, Hamza & Partners; Latham & Watkins; DLA Matouk Bassiouny
Tenor: 3.5 years
Margin: 350bp plus Libor
Date signed: October 8, 2009