China Development Bank provides a $375 million USD loan to Telefónica Europe for the procurement of telecommunications equipment

Project narrative

On January 5, 2012, China Development Bank Corporation (CDB) signed a $375 million USD (€284 million EUR) line of credit loan agreement with Telefónica Europe, B.V. — a Netherlands-incorporated wholly-owned subsidiary Spanish multinational telecommunications company Telefónica, S.A. — for the procurement of telecommunications equipment. This loan carried a maturity period of approximately 10 years, a final maturity date in 2022, a repayment schedule of fifteen six-monthly installments beginning April 15, 2015 (a grace period of 3.25 years), and a variable interest loan. Telefónica, S.A. issued a guarantee for this loan. The proceeds were to be used by the borrower for the procurement of telecommunications equipment. This was the first publicly announced vendor financing issued by CDB to a Spanish company. At the time of the loan, Telefónica was experiencing debt issues (spurred by Spain's weakening economy and Telefónica's growing net financial debt) and a need to cut costs to reduce debt in the near-term and maintain its investment-grade credit rating, with the $375 million USD loan advancing that need. The funds of the financing were released on February 15, 2012. As of December 31, 2012, the loan was fully drawn down. As of December 31, 2014, the outstanding principal was $375 million USD (€354 million EUR). Then, in 2015, Telefónica Europe repaid the $375 million USD loan early.