Bank of China (Milan Branch) contributes to a €2.4 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. 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. In addition to BOC, the following lenders contributed to the loan syndicate: Banco BPM S.P.A., BNP Paribas - BNL, BPER Banca S.p.A., Crédit Agricole Corporate and Investment Bank (CACIB), Intesa Sanpaolo S.p.A., the Milan Branch of SMBC Bank EU AG, the Milan Branch of Société Générale S.A. (SocGen), UniCredit S.p.A., Banca Monte dei Paschi di Siena S.p.A. (BMPS), Barclays Bank Plc, BofA Securities, Commerzbank Aktiengesellschaft Filiale di Milano, Deutsche Bank AG, HSBC Bank PLC, the Milan Branch of MUFG Bank, Ltd., Banco Santander, the Milan Branch of BBVA S.A., Banca Popolare di Sondrio – Società Cooperativa per Azioni, Citibank N.A., Mediobanca – Banca di Credito Finanziario S.p.A., Crédit Industriel et Commercial (CIC), National Westminster Bank Plc (NatWest), the Milan Branch of Natixis S.A., JP Morgan AG, and Banca Passadore & C.. BNP Paribas served as documentation agent. Intesa Sanpaolo served as facility agent. CACIB and UniCredit served as ESG coordinators. Banco BPM, BNP Paribas - BNL, BPER Banca, CACIB, Intesa Sanpaolo, the Milan Branch of SMBC Bank EU AG, the Milan Branch of SocGen, and UniCredit served as mandated lead arrangers and bookrunners. BMPS, Barclays, BofA Securities, Commerzbank Aktiengesellschaft Filiale di Milano, Deutsche Bank, HSBC, the Milano Branch of MUFG Bank, and Santander served as lead arrangers. The Milan Branch of BBVA, Banca Popolare di Sondrio, Citibank, Mediobanca, the Milan Branch of BOC, CIC, NatWest, the Milan Branch of Natixis, JP Morgan, and Banca Passadore served as co-arrangers. The RCF was oversubscribed for €4.4 billion EUR. As of December 31, 2021, the RCF was entirely unused.