Borrower Briefing

Oct 28, 2016 - been approached by Chinese banks, notably Bank of ... China Merchants Bank and ICBC. But Chinese .... Kai Preugschat departs Berne Union.
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28 October 2016

Borrower Briefing Chinese banks out with cheap offerings for Asia's commodities traders The rapid expansion of Chexim and Sinosure's influence in the Asian export finance market may yet be mirrored by Chinese banks in the lending market for Asian commodities traders – particularly those based in the region’s commodities trading hub Singapore. Signs are that Chinese banks are looking to expand their commodities-linked lending. A number of Singapore-based trading companies have recently been approached by Chinese banks, notably Bank of China International and Industrial and Commercial Bank of China (ICBC), with what borrowers claim are highly competitive rates. Chinese lenders are not totally new to the sector (see chart). For example, six of the seven mandated lead arrangers and senior bookrunners on Cofco Agri’s $2.6 billion revolving credit signed in September were Chinese - Agricultural Bank of China, Bank of China, China Construction Bank, China Development Bank, China Merchants Bank and ICBC. But Chinese banks have tended to take non-coordinating rolls – ABN Amro coordinated the Cofco Agri deal despite the borrower being a subsidiary of Chinese state-owned Cofco International – and lending has been restricted to China-owned traders. Cheap Chinese short term debt will be good news for Asia’s commodity-linked borrowers, for whom the cost of short-term working capital is key to their overall margins, particularly given the global slump in commodities prices. And the typical problems associated with Chinese loans in the export finance market – that they are tied to either Chinese manufacturing content or Chinese offtake contracts – do not apply. Furthermore, although the Chinese banks do not have the operational expertise of international lenders, the short-term tenors and relatively simple financial engineering in commodities working capital facilities significantly limit the potential for problems caused by lack of experience. For the major commodities traders – Gunvor Singapore, Olam International and Mercuria Asia for example – a Chinese bank offering would have to be priced at a major discount to take business away from international lenders, especially given international banks have largely stuck with the major commodities traders at realistic rates despite the unpredictability in the borrowers’ markets. But for second-tier borrowers, Chinese debt is worth consideration given pricing is rumoured to be in the 100-150bp over Libor range, which at a conservative estimation is around 100bp lower than the same borrowers would get from international banks. To see more coverage of trade finance activity in Asia, or to access our market-leading database of verified trade finance transactions, click here to take a complimentary trial of Trade Finance Analytics.

Mandate mill Eren Renewable Energy is looking to raise non-recourse debt for its 97.2MW Viento Los Hercules wind project in Santa Cruz province, Argentina. The project will benefit from a 20-year power purchase agreement with Argentine grid operator Cammesa. Montenegrin utility Elektroprivreda Crne Gore (EPCG) is looking for alternative financing for its 254MW coal-fired power project at Pljevla following the collapse of an ECA-backed deal with Ceska Exportni Banka and EGAP linked to an EPC contract with CEZ-owned Skoda Praha. US-based aircraft lessor Aircastle has sent out bank invitations for a $75 million unsecured three-year working capital loan. DBS has been mandated to lead arrange the deal which is being offered at three levels of participation. The final deadline for commitments in November 4. A Japanese sponsor – rumoured to be Mitsui - is looking for financing for a $100 million-plus power project in Iran. Chexim has agreed to finance the 1320MW coal-fired Pyra independent power project sponsored by Bangladesh-China Power Company. Two consortia - Marubeni with Fouad al Ghanim, and Sumitomo Corporation with Osaka Gas Company and National Industries Holding Group - have attended clarification meetings with the Kuwait Authority for Partnership Projects over their bids for the 1,500MW Az Zour North 2 independent water and power project. According to sources, the third bidding group, Acwa Power with Mitsui and Al Mulla, was not required to attend. Reliance Industries has issued a request for proposals for a loan package to refinance a $1.75 billion borrowing signed in November 2013. The new loan is expected to comprise a major two-year tranche and a small four-year portion. Pricing for the leads is likely to reflect Reliance’s earlier refinancing this year and come in at around 95bp over Libor all-in.

Top Stories Olam International completes $2bn debt refinancing The facility consists of three revolving tranches: a 364-day $400 million portion, a two-year $800 million tranche and a three-year $800 million piece.

BNDES halts $4.7bn of export finance loan payments BNDES has halted around $4.7 billion in loan payments to engineering companies involved in the Petrobras Lava Jato corruption investigation.

Minera Escondida completes first drawdown on $1.2bn loan The loan was oversubscribed in syndication and consequently upped to $1.2 billion.

Gunvor out with annual European RCF refinancing The loan, effectively a repeat annual borrowing by Gunvor to finance its European commodity trading operations, is expected to be finalised next month.

Alba closes record corporate loan in Bahrain Alba’s original target was to raise between $500 million to $700 million, but due to heavy oversubscription, Alba upsized the loan to $1.5 billion, making it the largest corporate loan in the history of Bahrain.

News in brief Bahrain LNG ECA-backed debt pricing looking competitive The project is a 20 year BOOT concession for an 800 million standard cubic feet per day LNG terminal in the Hidd industrial area of Bahrain.

BNDES backs Calango 6 wind project Neoenergia and Iberdrola have raised a R$274.8 million ($85.5 million) 17-year loan from BNDES backing their 30MW Calango 6 wind farm project in Rio Grande do Norte state, Brazil.

EBRD provides Isbank with $55m renewables funding The financing – which is supported by a €1.9 million ($2.07 million) grant from the EU – comes under the umbrella of the EBRD’s recently expanded Mid-size Sustainable Energy Financing Facility (MidSEFF) which now totals €1.5 billion.

Bank of Georgia closes $50m trade finance facility Funds will be used to support the import and export transactions of its corporate customers.

EDC, EBRD, OPIC pledge $839m for Turkish hospital The hospital will be developed by a GE, GAMA Holding and Turkerler Insaat joint venture.

Air India out to banks with aircraft refinancing The new loan will replace a bilateral loan of an equivalent amount provided by Standard Chartered in 2011 to partly fund the purchase of three Boeing 777-300 ERs.

Sirius Minerals seals $300m deal with Hancock The deal has been described as a clear endorsement of the polyhalite project in North Yorkshire, UK.

JinkoSolar raising club deal for Mexican PV projects JinkoSolar won three Mexican solar PV projects in a long-term electricity auction in April.

JBIC agrees credit line for Port of Vostochny The deal is part of a package agreed in principal in 2015 that includes credit lines totalling around $700 million for the ports of Vostochny and Nakhodka.

Apollo Aviation out with second 2016 securitization The $640 million 25-year issue is designed to generate funding for the acquisition of an aircraft portfolio comprising 35 used aircraft on lease to 22 airlines in 20 countries.

Kexim supports $24.4bn UAE nuclear financing ENEC and Kepco have also formed a joint venture to drive the Barakah project forward.

BB Energy signs $200m RCF The RCF will be used for general corporate and working capital purposes and will refinance the $200 million RCF signed in 2015.

Emirates NBD and ICICI Bank debut trade blockchain network This is the first time a private sector entity in the UAE has tested a blockchain network for banking services.

PTA tightens pricing on latest trade refi The pricing is 20bp tighter on the two-year tranche than the bank got on its 2014 two-year deal.

Kexim back for more dollars Kexim has closed another major dollar fundraising with its first four-tranche deal – a $2.5 billion offering similar to the three-tranche deal it closed in May.

People and places ING global head of structured export finance departs Eric de Jonge joined ING 25 years ago and has held the global head of structured export finance title since 2005.

KPMG appoints Mayor global head energy and natural resources Mayor has held a number of roles at KPMG including US national sector for energy, natural resources and chemicals, and as Americas oil and gas lead.

KCB Group expands trade, export services across Africa The bank plans to enter new markets, including Somalia, Ethiopia and Burundi.

AfDB appoints Hott head of power and energy Hott will start his new role on November 1.

UKEF appoints new COO Dasgupta joins UKEF from HSBC, where he was most recently global head of the transaction management group within the risk distribution unit of the bank’s global trade and receivables finance division.

Kai Preugschat departs Berne Union He will take up a new role with the Asian Development Bank.

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