Bank of China (Milan Branch) contributes to a €1.8 billion EUR syndicated revolving credit facility to Leonardo for refinancing and working capital purposes

Project narrative

On July 9, 2014, a syndicate of 26 banks — including the Milan Branch of the Bank of China (BOC) — entered into a €2.2 billion EUR syndicated revolving credit facility (RCF) agreement with Finmeccanica S.p.A. — an Italy-incorporated multinational technology manufacturer and defense contractor headquartered in Rome listed on the Milan Stock Exchange with Italy's Ministry of Economy and Finance as the largest shareholder (30.204% of share capital) later known as Leonardo-Finmeccanica and then Leonardo — for refinancing and working capital purposes. The RCF carried a maturity period of five years, a final maturity date in July 2014, and a variable interest rate based on EURIBOR plus an initial margin of 180 basis points (bps), with the margin further changing based on a rating grid tied to the credit rating assigned to the borrower, ranging from a minimum of 75 bps if Finmeccanica had an investment grade rating or increase to a maximum of 270 bps if Finmeccanica’s debt was given a rating below BB or no rating at all. The interest periods could be one, two, three, or six months at the borrower's option. The RCF had commitment fees equal to 35% of the margin on the portion utilizable at any given time, utilization fees of 15 bps, 30 bps and 60 bps based upon the percentage utilization, respectively from zero to 33%, up to 66% and over 66%, and up-front fees of 90 bps, 75 bps, and 60 bps to be paid to the syndicate of the pool on the basis of the amounts of the commitments each bank committed. The RCF included two financial covenants: the ratio of Group net debt — excluding payables to the joint ventures MBDA and Thales Alenia Space — to earnings before interest, taxes, depreciation and amortization (EBITDA) no higher than 3.75 and a ratio of EBITDA to net interest lower than 3.25, both to be tested annually based upon the consolidated data at the end of the year. The proceeds were to be used by the borrower to repay and replace an existing €2.4 billion EUR RCF signed in 2010, which was then cancelled by the borrower, and to satisfy the working capital financing needs of the borrower. Record ID#108810 captures BOC's contribution. As of December 31, 2014, the RCF was entirely unused. Then, on July 6, 2015, a syndicate of 24 banks — including the Milan Branch of BOC — entered into an amendment agreement with Finmeccanica for the €2.2 billion EUR syndicated RCF; in the amendment, the lenders lowered the value of the loan to €2.00 billion EUR, extended the maturity period of the RCF by one — for a new maturity period of six years — with its new maturity date in July 2020, and amended the initial margin of the interest rate from 180 bps to 100 bps, a decline of 80 bps. Record ID#108826 captures BOC's contribution to the amendment. As of December 31, 2015, the RCF was entirely unused. Then, on February 14, 2018, a syndicate of 27 banks — including the Milan Branch of BOC — entered into a €1.8 billion EUR syndicated RCF with Leonardo S.p.A. — Finmeccanica's new name — for refinancing and working capital purposes. The RCF carried a maturity period of five years, a final maturity date in July 2023, and a variable interest rate based on EURIBOR plus an initial margin of 75 bps. The RCF included two financial covenants: the ratio of Group net debt — excluding payables to the joint ventures MBDA and Thales Alenia Space — to earnings before interest, taxes, depreciation and amortization (EBITDA) no higher than 3.75 and a ratio of EBITDA to net interest lower than 3.25, both to be tested annually based upon the consolidated data at the end of the year. The proceeds were to be used by the borrower to replace (refinance) the existing €2.2 billion EUR RCF signed in 2014, which was then cancelled by the borrower, and to satisfy the working capital financing needs of the borrower. Record ID#108827 captures BOC's contribution to the RCF. In addition to BOC, the following lenders contributed to the loan syndicate: the Milan Branch of The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU), Unicredit S.p.A., the Milan Branch of Commerzbank Aktiengesellschaft, Cassa Depositi e Prestiti S.p.A. (CDP), BNP Paribas – BNL, the Milan Branch of Sumitomo Mitsui Banking Corporation Europe Limited, the Milan Branch of HSBC Bank plc, the Milan Branch of Citibank N.A., the Milan Branch of Barclays Bank Plc, Banco BPM S.p.A., the Milan Branch of Banco Bilbao Vizcaya Argentaria S.A. (BBVA), Intesa Sanpaolo S.p.A., Crédit Agricole Corporate and Investment Bank (CACIB), the Milan Branch of Société Générale S.A. (SocGen), the Milan Branch of Bank of America N.A., Banco Santander S.A., the Milan Branch of Natixis S.A., National Westminster Bank Plc (NatWest), the Milan Branch of The Royal Bank of Scotland Plc (RBS), Deutsche Bank AG, UBI Banca S.p.A., Banca Popolare dell'Emilia Romagna Soc. Coop, Mediobanca, the Milan Branch of JPMorgan Chase Bank N.A., Crédit Industriel et Commercial (CIC), and Banca Popolare di Sondrio ScpA. (BPSO). UniCredit served as global coordinator, coordinating and documentation bank, and agent bank. The Milan Branch of BTMU, UniCredit, the Milan Branch of Commerzbank AG, CDP, BNP Paribas - BNL, the Milan Branch of Sumitomo Mitsui Banking Corporation Europe Limited, the Milan Branch of HSBC Bank, the Milan Branch of Citibank N.A., the Milan Branch of Barclays Bank, Banco BPM, the Milan Branch of BBVA, Intesa Sanpaolo, CACIB, the Milan Branch of SocGen, the Milan Branch of Bank of America, and Banco Santander S.A. served as mandated lead arrangers and bookrunners. The Milan Branch of Natixis, NatWest, the Milan Branch of RBS, Deutsche Bank, and UBI Banca served as lead arrangers. Banca Popolare dell'Emilia Romagna, Mediobanca, the Milan Branch of BOC, the Milan Branch of JPMorgan Chase Bank, CIC, and Banca Popolare di Sondrio served as co-arrangers. The transaction was oversubscribed to €3.6 billion EUR. Then, on October 7, 2021, a syndicate of 26 banks — including the Milan Branch of BOC — entered into a €2.4 billion EUR syndicated environmental, social, and governance (ESG)-linked RCF with Leonardo S.p.A. for refinancing and working capital purposes. The RCF was divided into two tranches: a €1.8 billion EUR tranche with a maturity period of five years and a final maturity date in September 2026 and a €600 million EUR tranche with a maturity period of three years and a final maturity date in September 2024. The RCF carried an a variable interest rate based on a floating rate plus a margin. As an ESG-linked facility, the RCF was linked to two specific ESG indicators — the reduction of carbon dioxide (CO2) emissions through eco-efficiency of industrial processes and the promotion of the employment of women with Science, Technology, Engineering, and Mathematics (STEM) degrees — against which achievement would lead to a reduction in the margin of the RCF. The RCF included two financial covenants: the ratio of Group net debt — excluding payables to the joint ventures MBDA and Thales Alenia Space — to earnings before interest, taxes, depreciation and amortization (EBITDA) no higher than 3.75 and a ratio of EBITDA to net interest lower than 3.25, both to be tested annually based upon the consolidated data at the end of the year. The proceeds were to be used by the borrower to replace (refinance) two existing RCFs — the existing €1.8 billion EUR RCF signed in 2018 and a €1.25 billion EUR RCF, which were then both cancelled — and to satisfy the working capital financing needs of the borrower. Record ID#108828 captures BOC's contribution to the RCF. As of December 31, 2021, the RCF was entirely unused.