Narrative
Full Description
Project narrative
On December 18, 2009, Black Gold Drilling LLC — a special purpose vehicle and subsidiary of Schahin (a Brazilian construction firm) — signed a $800 million senior, secured, syndicated loan agreement with 18 banks, including China Development Bank (CDB), for debt refinancing purposes. The loan restructured an existing credit agreement that was signed on October 25, 2007, which CDB also contributed to, captured via Record ID#92461. The new loan carried an 11 year maturity and an interest rate of LIBOR plus a 3.38% margin. The participants in the loan syndicate included Itau-Unibanco, Caterpillar Financial Services, UniCredit, WestLB, Standard Chartered Bank, BBVA, Shinhan Bank, Nordkap Bank, Nomura, MUFG Bank, Mizuho Financial Group, Intesa Sanpaolo, KfW Development Bank, CIC Bank, Dexia Group, HSH Nordbank, International Finance Corporation, and China Development Bank (CDB). Mizuho, Standard Chartered, Unicredit/HVB, and WestLB were the lead arrangers. The precise contribution of CDB to the 2009 loan is unknown. Further, some sources indicate that multiple Chinese financial institutions contributed to the syndicate, not just CDB. The proceeds of the loan were to be used by the borrower to refinance a previous loan for the construction of two semi submersible drilling platforms known as Schahin I and Schahin III. The refinancing was necessary due to delays in project implementation. The rigs (drilling platforms) were to be built by Singapore’s Yantai Raffles Shipyard Company, with whom two EPC contracts were signed, at its facilities in China. EPC contract terms included performance guarantees issued by Sinosure for 10% of the contract values, liquidated damages equal to 5% of the contract values, and, according to some sources, retention payments equivalent to 15% of the contract values. Petrobras was expected to use the drilling platforms in the Campos Basin offshore Brazil. Schahin I was to be operated under a seven-year contract with Petrobras starting in 2010 and was designed to operate at depths up to 2,000m, with a drilling depth of 7,500 meters below the seabed. The contract was won in a Brazilian-only bid. The Schahin III rig received a five year contract after a bidding process open to international firms. It was designed to operate at a depth of 2,400 meters, respectively, also with a drilling depth of 7,500 meters below the seabed. Construction for both rigs was originally expected to take 3.5 years, though it is unknown to what extent this estimate was affected by the implementation delays that resulted in the project's refinancing. While the exact start and end dates of the rigs' construction are unknown, the project was completed, and the rights to the two drilling platforms were sold to ICBC in 2014 through a sale-leaseback transaction in order to repay this loan. Then, on July 13, 2021, a lawsuit was filed against a total of twelve banks (involved in one or both of the syndicates) by several subsidiaries of the Schahin Group. The lawsuit claimed that the banks had collaborated 'with the CEO and CFO of two Schahin Group entities [to sell] the oil rigs to ICBC below fair value when the Schahin Group was in financial distress.'
Staff comments
1. This syndicated loan may include other Chinese financiers. The list of 18 banks that contributed to the loan is taken from "Black Gold Two Semi-Submersible Drilling Platforms Refinancing" only includes a contribution from CDB. However, other reports, such as "Schahin Drilling: Yantai surprise", indicate multiple Chinese financial institutions were involved in financing. Further, reporting on the original 2007 loan also refers to multiple Chinese banks being involved, including naming China Construction Bank, but a breakdown of individual bank contributions again only includes CDB. Lastly, the lawsuit against twelve of the banks involved in one or both of the loans includes both Bank of China and China Development Bank as respondents. These issues warrant further investigation. 2. AidData has estimated the all-in interest rate by adding 3.38% to average 6-month LIBOR in December 2008 (2.178%). 3. AidData has coded the loan as collateralized because it is referred to as a ‘secured’ loan. 4. IJGlobal reports that Tranche A and B of the project will both be extended by 1.25 years, rather than the 1 year extension reported elsewhere. This issue warrants further investigation. 5. The lawsuits related to these drilling rigs have identification number 1:21-cv-06020 (Aj Ruiz Consultoria Empresarial S.A. v. Bank of China Limited et al.) and 1:22-cv-00521 (AJ Ruiz Consultoria Empresarial S.A. v. Banco Bilbao Vizcaya Argentaria, S.A. et al)