Narrative
Full Description
Project narrative
On April 24, 2012, China Development Bank Corporation (CDB) entered into a Memorandum of Understanding (MoU) with Volvo Personvagnar AB (Volvo Car Corporation) — a Swedish multinational manufacturer of luxury cars headquartered in Torslanda, Gothenburg, Sweden then wholly-owned by Geely Sweden AB — for a strategic partnership. The parties agreed to explore potential CDB financing of Volvo's efficient energy research and development programs and production facilities in China. On November 30, 2012, a syndicate of four banks — CDB, the Luxembourg Branch of the Bank of China Limited (BOC), the Offshore Banking Unit of the Bank of Communications Co., Ltd. (BoComm), and Industrial and Commercial Bank of China (Europe) S.A., Sucursal En Espana (ICBC (Europe)) — signed a €922,311,354 EUR ($1.2 billion USD) loan facility agreement with Volvo Car Corporation for refinancing purposes. This loan was divided into two tranches: a €815,334,125 EUR term loan facility tranche known as Facility A and a €106,977,229 EUR term loan facility tranche known as Facility B. Both tranches carried a maturity period of eight years and a final maturity date of December 13, 2020, a grace period of two years and a repayment profile of 13 semi-annual installments beginning on December 15, 2014, and an interest rate of EURIBOR plus a fixed-margin. The loan came under the umbrella of the April 2012 strategic partnership with CDB. The facility featured affirmative and negative covenants and financial covenants, the financial covenants requiring the borrower to maintain a ratio of consolidated net debt to adjusted consolidated EBITDA on the last day of each financial year and each financial half-year) will no greater than 3.0 to 1.0; and a ratio of free cash flow to debt service for the last day of each financial year and each financial half-year) of not less than 1.5 to 1.0. It contained events of defaults including certain cross defaults in respect of other indebtedness equal to or in excess of €20 million EUR. The facility was governed by English law with any dispute or claim in connection to it to by be resolved binding arbitration at the Hong Kong International Arbitration Centre. This loan was secured by (i.e. collateralized against) a share pledge of shares in Volvo Car Corporation owned by Geely Sweden AB and then, after Geely Sweden AB merged into Volvo Car Corporation, owned by Geely Sweden Automotive AB (renamed in December 2015 as Volvo Car AB) — a Swedish public limited liability company and wholly-owned subsidiary of Geely Sweden Holdings AB, itself wholly-owned by Shanghai Geely Zhao Yuan International Investment Co., Ltd., a wholly-owned (indirect) subsidiary of Zhejiang Geely Holding Group Co., Ltd. — which was released on May 6, 2016 and then replaced by a share pledge granted by Geely Sweden Holdings AB over the entire issued share capital of Volvo Car AB. Additionally, Geely Sweden Automotive AB)/Volvo Car AB and Geely Sweden Holdings AB each issued an irrevocable, unconditional, joint and several, on demand guarantee all amounts payable to the lenders by the borrower. CDB served as agent and InterTrust CN (Sweden) AB served as security agent. The proceeds of Facility A were to be used by the borrower to partly refinance existing debt via the prepayment of certain outstanding indebtedness. The proceeds of Facility were to be used by the borrower to refinance project costs associated with the future car emissions research and development project and related chassis development. Record ID#104960 captures CDB's contribution to Facility A. Record ID#104962 captures BOC's contribution to Facility A. Record ID#104963 captures BoComm's contribution to Facility A. Record ID#104964 captures ICBC (Europe)'s contribution to Facility A. Record ID#104965 captures CDB's contribution to Facility B. Record ID#104966 captures BOC's contribution to Facility B. Record ID#104967 captures BoComm's contribution to Facility B. Record ID#104968 captures ICBC (Europe)'s contribution to Facility B. Following the CDB loan, Volvo repaid a loan from the European Investment Bank (EIB) ahead of schedule. During the first quarter of 2013, Facility B was totally drawn down. Then, on November 22, 2013, the lenders signed an amendment agreement with Volvo Car Corporation for the facility; in this amendment, CDB provided a new third tranche: a $800,000,000 USD term loan facility tranche known as Facility C. This tranche carried a maturity period of eight years and a final maturity date of November 27, 2021, a grace period of three years and a repayment profile of 11 semi-annual installments beginning on November 27, 2016, and an interest rate of LIBOR plus a fixed margin; it retained the same security, guarantees, and covenants of the €922,311,354 EUR loan. The proceeds of Facility C were to be used by the borrower to partly finance the Volvo XC90 Car Development Project. The borrower planned to draw down the loan partly in 2013 with further drawdowns planned for 2014 and 2015. Record ID#104969 captures CDB's contribution. Record ID#104970 captures BOC's contribution. Record ID#104971 captures BoComm's contribution. Record ID#104972 captures ICBC (Europe)'s contribution. The facility was amended again on November 16, 2015 and then on May 6, 2016. In November 2013, $466 million USD was drawn down under the loan. As of March 31, 2016, all thee tranches under the CDB facility were fully drawn. In January 2018, the borrower partly repaid €589 million EUR of the CDB facility.
Staff comments
1. While none of the press releases refer to this as a syndicated loan, Volvo Car AB's Offering Memorandum specifically lists CDB, BOC Luxembourg Branch, OBU Unit of BoComm, and ICBC (Europe) as lenders, while other Volvo sources, including that offering memorandum, call it the CDB facility, giving the impression it was bilateral. It may be the other Chinese banks only contributed to certain tranches (i.e. just Facility C, not Facility A or B, vice versa, or any combination thereof) or joined in later amednments. However, in the absence of specific details on their contributions, AidData has assumed each of the four lenders contributed to each tranche at the time of signing. 2. The individual contributions of the four lenders to this €106,977,229 EUR syndicated tranche are unknown. AidData has assumed each lender contributed to each tranche. Therefore, to estimate the contribution of each Chinese state-owned bank, AidData has assumed each lender contributed equally (€26,744,307.25 EUR) to the loan syndicate.