ICBC provides a $350 million USD buyer's credit loan for the Jumbo Resin-Processing Plant Construction Project

Project narrative

In January 2013, M&G Chemicals S.A. — a Luxembourg-incorporated Italian holding and petrochemical company then wholly-owned by the Ghisolfi family via Italy-incorporated M&G Finanziaria S.r.l., a wholly-owned subsidiary of Italy-incorporated Mossi & Ghisolfi S.p.A. — entered into an engineering, procurement, and construction (EPC) contract with Sinopec Engineering Group (SEG) in which SEG agreed to execute the construction of or the Jumbo Resin-Processing Plant Construction Project a turnkey basis for a total consideration of $1.15 billion USD (€884.6 million EUR) and to arrange $350 million USD (€258.7 million EUR) in export financing for M&G for the purchase of equipment to be sourced from China. Then, the Industrial and Commercial Bank of China (ICBC) entered into a $350 million USD unsecured credit facility agreement with M&G Resins USA, LLC — a Delaware-incorporated special purpose vehicle and wholly-owned subsidiary of M&G USA Corporation, a Delaware-incorporated subsidiary of Mossi & Ghisolfi International S.à r.l., a wholly-owned subsidiary of M&G Chemical S.A. (87.7% equity stake) and Società Italiana per le Imprese all’Estero S.p.A. (SIMEST), majority-owned by Italian state-owned Cassa Depositi e Prestiti S.p.A. (12.3% equity stake) — for the Jumbo Resin-Processing Plant Construction Project. M&G Chemicals S.A. issued a guarantee for the borrower's obligations. The loan was in negotiation as of November 29, 2013, but eventually signed and disbursed. The proceeds were to be used by the borrower to finance the initial construction of a vertically integrated plastic resin (polyethylene terephthalate (PET)/purified terephthalic acid (PTA)) manufacturing plant and a combined heat and power utility plant to be operated by NRG Texas Power LLC located on a 412 acre in Corpus Christi, Nueces County, Texas with a nominal capacity of 1.1 million tons per year for its PET line and 1.3 million tons per year for its PTA line. The PET line would receive PTA via a direct pipe location. The plant would be also designed to process bio-based raw materials and equipped with recycling capabilities. The project had a planned cost of approximately $1.15 billion USD, to be financed via the ICBC loan, a $350 million USD investment from DAK Americas LLC in exchange for the right to purchase 400,000 metric tons per year of PET from the plant for five years from commencement of operations at Corpus Christi, at a price based on the cost of converting raw materials into the finished product on a “cost-plus” basis and a $250 million USD Banco Inbursa, S.A. dated March 21, 2013. The project received $16.4 million USD in tax incentives. The project was expected, when completed, to be the largest vertically integrated single line PTA/PET production facility in the world and the largest PTA plant in the Americas. The project was to create 250 permanent jobs, 700 indirect jobs, and 3,000 plus jobs during construction. In 2011, Texas Governor Rick Perry praised the project for strengthening the project. On September 24, 2012, M&A entered into a memorandum of understanding (MoU) with Flint Hills Resources LP pursuant for the supply of two-thirds of the PTA’s paraxylene (PX). M&G Resins was required to submit a Prevention of Significant Deterioration Air Quality Permit for Greenhouse Gas Emissions due to the plant's projected emissions were over 100,000 tons of carbon dioxide a year. In January 2013, M&G entered into a tolling agreement with DAK to begin five years after operations began, to supply 400,000 metric tons of PET year to DAK on a toll conversion basis (an arrangement whereby a producer converts raw materials provided by the customer into the finished product, which the customer then off-takes from the producer). Sinopec Engineering was the EPC contractor. Other contractors included Integrity Mechanical Specialists (IMS), which sub-contracted Express Metals Works with a $6 million USD contract and Welco. Yantai Gaoxin Machinery Manufacturing Co., Ltd. provided its chemical fiber special equipment for the project. Fluor Enterprises was also a contractor. Construction began in April 2013 with a projected completion date in December 2015. However, due to construction costs far exceeding initially projects, disputes with its prior EPC firm resulting in the filing of purported mechanics' liens against the property in excess of $196 million USD and construction and supply disruptions caused by Hurricane Harvey, completion of the plant was significantly delayed. As of October 30, 2017, the project was less than 85% complete. Due to the delays and rising in cost, M&G USA incurred significant additional debt to complete the project; however, because the plant was inoperable, it was impossible for M&G to meet its obligations to future customers of the plant and service its existing debt, which partly depended on the revenue to be generated by the plant. M&G USA began to operate under severe liquidity constraints in 2017, forcing it to significantly scale back construction and development of the project. The project faced more problems from at least 40 liens filed against M&G Resins USA from 2016 to 2017 by contractors, seeking payment due for work done on a project. Numerous contractors, including 20 Texas companies, claimed that they were not paid for work, with over $100 million USD of lien claims against the project filed by April 2017. Some U.S. contractors alleged that M&G Resins USA hadn't paid them since 2015. Some contractors, local businesses in Texas, faced severe struggles due to non-payments, being unable to pay workers (some of whom were laid off) or take on other jobs and resulting to take out mortgages on their homes to remain afloat. In early December 2016, IMS and its approximately 800 subcontractors were kicked off the project after demanding payment for $53 million USD of work. In early September 2017, Fluor Enterprises, one of the the contractors, laid off 274 workers at the plant. Then weeks later, M&G announced it would lay off 100 of its own employees. The M&G USA and its affiliates, along with three Luxembourg affiliates, filed for chapter 11 bankruptcy on October 30, 2017 with liabilities of approximately $2 billion. M&G claimed that it had spent $1.1 billion USD in construction costs and would need another $505 million USD to complete. At October 30, 2017, the full $350 million USD principal amount under the ICBC loan was outstanding. ICBC had the largest unsecured claim on the company, with $355,817,22876 USD as of October 30, 2017. On November 13, 2017, the United States Department of Justice Office of the United States Trustee appointed the creditors' committee of M&G, including ICBC as one of the seven members. Between October 2017 and April 2018, M&G entered into four funding arrangements with four different lenders to fund the chapter 11 cases and sale process. In March 2018, the sale of the resin manufacturing plant for $1 billion USD was approved. In August 2018, the chapter 11 cases of the three Luxembourg affiliates were dismissed, effective in November 2018. As of September 5, 2018, the full $350 million USD principal amount under the ICBC loan was outstanding. Voting on the liquidation plan began in November 2018, and creditors voted overwhelmingly in favor. On December 17, 2018, the United States Bankruptcy Court for the District of Delaware entered an order confirming the Third Amended Plan of Liquidation of M&G USA Corporation and eight of its affiliates. This plan provided for the payment or deemed payment in full of the debtors' postpetition financing and prepetition first lien lender and other secured lenders; the establishment of a reserve of $265 million USD to pay mechanics lien claims; and the establishment of a litigation trust, funded by a cash pool of up to $50 million USD, negotiated in connection with the sale of the plant, to pursue and resolve claims and make distributions to creditors. On December 28, 2018, after receiving antitrust approval, the M&G debtors closed the sale of their partially constructed manufacturing facility in Corpus Christi for over $1 billion USD. The liquidation plan became effective on December 31, 2018. In February 2019, the U.S. Federal Trade Commission issued a complaint that the acquisition, done by Alfa S.A.B. de C.V., Indorama Ventures Plc, and Far Eastern New Century Corporation, was unfair. It ordered that the three companies not own more than one-third of the project or its off-take, that the plant was mandated as an independent toll manufacturing plant, and that the three companies not receive, share, or use confidential information regarding the facility. In February 2019, the new ownership planned to begin construction later the year and commission in May 2020, which was not met. Due to rising costs and the COVID-19 pandemic, the project was paused. As of July 2022, construction was to resume in August 2022 and begin operations in early 2025. In October 2023, because of rising construction and labor costs, the project was halted once again to reevaluate it. As of August 2024, the project was still paused, with market conditions worsening and rising costs for construction; Alpek wrote off 100% of its share and Indorama wrote down $308 million USD.