Agricultural Bank of China provides $25.5 million loan to Cimento Tupi S.A. for the Pedra do Sino Cement Plant Expansion Project

Project narrative

On January 8, 2013, the Agricultural Bank of China (ABC) and Cimento Tupi S.A. -- a Brazilian cement and concrete products company -- signed a Sinosure-backed, $25.5 million facility (loan) agreement for the Pedra do Sino Cement Plant Expansion Project. The loan carried a 4.123-year maturity (final maturity date: February 20, 2017) an interest rate of 12-month LIBOR plus a 2.80% margin. It was backed by a Sinosure credit insurance policy and a security over a fixed deposit account. The borrower was responsible for make semi-annual, principal payments beginning on August 20, 2014 and semi-annual, principal payments beginning on February 20, 2013. The loan's principal amount outstanding was $20,198,109.71 as of December 30, 2020. The purpose of the project was to build a second production line at Cimento Tupi's Pedra do Sino cement plant in Carandaí. In 2013, the nominal production capacity of Pedra do Sino cement plant increased from 3,000 tons to 6,500 tons per day after Cimento Tupi started clinker production in the 2nd production line of the plant in Carandaí. However, there are multiple indications that the ABC loan financially underperformed vis-a-vis the original expectations of the lender. The borrower (cement producer) struggled financially due to a downturn in the cement sector since 2014 and currency depreciation (i.e. depreciation of the Brazilian real against the U.S. dollar). The borrower also missed principal and interest payments to ABC that were due in August 2015, February 2016, August 2016, and February 2017. Its lenders launched legal action in April 2019 after the company defaulted on around $30 million of loan repayments. Then, in January 2021, Cimento Tupi filed for so-called preventative bankruptcy to deal with $627 million of outstanding debt.