ICBC (Europe) contributes to the €487.8 million EUR investment term loan credit facility tranche of a $1.2843 billion USD-equivalent syndicated loan for the Polimery Police Project

Project narrative

On May 31, 2020, a syndicate of 13 banks — including the Poland Branch of the Industrial and Commercial Bank of China (Europe) S.A. (ICBC (Europe)) — entered into an approximately $1.2843 billion USD (zł5 billion PLN)-equivalent syndicated loan facilities agreement with Grupa Azoty Polyolefins S.A. — a Poland-incorporated special purpose vehicle (SPV) and joint venture of Grupa Azoty S.A. (30.52% equity stake), Grupa Azoty Zakłady Chemiczne "Police" S.A. (34.41% equity stake), Grupa LOTOS S.A. (17.3% equity stake), Hyundai Engineering Co (16.63% equity stake), and Korea Overseas Infrastructure & Urban Development Corporation (KIND) (1.14% equity stake) — for the Polimery Police Project. The loan was divided into four tranches: a $537,700,000 USD investment term loan credit facility tranche with a maturity period of 10.5 years and a final maturity date of November 29, 2030, albeit with an extension option to take it out to December 15, 2035; a €487,800,000 EUR ($528.40 million USD) investment term loan credit facility tranche with a maturity period of 10.5 years and a final maturity date of November 29, 2030, albeit with an extension option to take it out to December 15, 2035; a $180,000,000 USD working capital facility tranche with a maturity period of 5.5 years and a final maturity date of November 29, 2025; and a z150,000,000 PLN ($38.20 million USD) Value-Added Tax (VAT) working capital financing facility tranche with a maturity period of 4.5 years and a final maturity date of November 29, 2024. The loan carried a variable interest rate based on EURIBOR or LIBOR, as appropriate, plus a margin. The loan was secured by (i.e. collateralized against) a mortgage and other standard securities. Disbursement of the funds would occur after the fulfillment of the conditions precedent stipulated in the facilities agreement. On February 25, 2021, Bank Pekao S.A. issued confirm that all conditions had been met and that the facilities agreement could be issued. In addition to ICBC (Europe), the following lenders contributed to the loan syndicate: Alior Bank S.A., Bank Gospodarstwa Krajowego (BGK), Bank Polska Kasa Opieki Spółka Akcyjna (Bank Pekao S.A.), BNP Paribas Bank Polska S.A., European Bank for Reconstruction and Development (EBRD), mBank S.A., Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna (PKOP), Powszechny Zakład Ubezpieczeń Spółka Akcyjna (PZU S.A.), PZU Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych BIS 2, Powszechny Zakład Ubezpieczeń na Życie (PZU na Życie S.A.), and Santander Bank Polska S.A.. Bank Polska Kasa Opieki was the coordinator. ICBC Standard Bank PLC served as the hedge counterparty. BOŚ S.A. committed $21,495,000 USD to the $537.7 million USD investment term loan credit facility tranche, €19,500,000 EUR to €487.8 million EUR investment term loan credit facility tranche, and $10,000,000 USD to the $180 million USD working capital tranche. The other lenders, including ICBC (Europe), reportedly contributed to each tranche. Record ID#109051 captures ICBC (Europe)'s contribution to the $537.7 million USD term loan. Record ID#109052 captures ICBC (Europe)'s contribution to the €487.8 million EUR. Record ID#109053 captures ICBC (Europe)'s contribution to the $180 million USD working capital tranche. Record ID#109054 captures ICBC (Europe)'s contribution to the z150 million PLN VAT working capital tranche. On December 15, 2023, the lenders signed a stabilization agreement to extend the availability period. On June 14, 2024, the lenders signed an amendment to the stabilization agreement until July 31, 2024. In addition to the syndicated loan, Grupa Azoty S.A. and Grupa Azoty Zakłady Chemiczne 'Police' S.A. (acting as the facility agent and the security agent) entered into a €105 million EUR ($113.7 million USD) subordinated mezzanine support loan to Grupa Azoty Polyolefins S.A.. The proceeds were used by the borrower for the Polimery Police Project, which sought to construct a new polyolefin and petrochemical complex in Police, West Pomeranian Voivodeship consisting of a new propane dehydrogenation (PDH) unit, a new polypropylene (PP) unit, a PP logistics infrastructure system with auxiliary systems and inter-unit connections and a handling and storage terminal with port facilities to unload and store propane and ethylene from sea ships via an offshore gas terminal to source production feedstock (propane and ethylene). The project used Oleflex UOP technology for the production of polymer-quality propylene and the Unipol GRACE technology for the production of polypropylene, allowing for lower consumption of raw materials and energy Police Polimery would have an annual capacity of 437,000 tons polypropylene, 429,000 tons of propylene, and 17,000 tons of hydrogen from the dehydrogenation process. The project was seen as strategic to Polish industry due to its large increase in Polish plastics production capacity and reduction of its trade gap, while the offshore gas terminal would improve Poland's energy and raw material independence (relevant given the geopolitical situation in Europe since the Russian invasion of Ukraine). It was expected to further develop Poland's industrial sector and help its plastic processing. The project was described as the largest investment project in Central and Eastern Europe's chemical company and as one of the largest ever project finance projects in Poland. Grupa LOTOS S.A. contributed zł300,000,000 PLN in equity, Hyundai $73,000,000 USD (zł275,808,600 PLN), and Korea Overseas Infrastructure & Urban Development Corporation $5,000,000 USD (zł18,891,000 PLN). Grupa LOTOS and KIND also offered subordinated loans to Grupa Azoty Polyolefins S.A. in the amount of zł200 million PLN (Grupa LOTOS S.A.) and $52 million USD. These three sponsors formally acquired the shares in the project company in November 2020 (before the loan was issued), but were part of the original agreement on May 31, 2020. The project had an overall cost of $1.54430 billion USD. Hyundai Engineering Company, Ltd. served as general contractor under an engineering, procurement, and construction (EPC) contractor signed with Grupa Azoty Polyolefins S.A on May 11, 2019. Formal handover of the construction site to Hyundai occurred on January 7, 2020. Commercial operation was scheduled to begin during the fourth quarter of 2022. Construction continued during the COVID-19 pandemic, but experienced difficulties. The first shipment of ethylene was delivered on March 27, 2023. Polypropylene production was launched on June 26, 2023 as part of the commissioning phase, with gradual increases until full operation was achieved. By August 2024, both units were operating and the plant was producing and selling product even though formal commissioning of the entire project had not been completed, with final improvements and the overcoming of some defects of the project. On September 6, 2024, Hyundai Engineering submitted an amendments to the EPC contract seeking to extend the completion date of the project and increase its compensation due to alleged coordination issues.