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Overview

ICBC provides $1.5 billion oil-backed pre-export loan facility to PDVSA special purpose vehicle (Linked to Record ID#37915, #37918)

Commitments (Constant USD, 2023)$1,625,726,752
Commitment Year•2012Country of Activity•VenezuelaDirect Recipient Country of Incorporation•NetherlandsSector•Other Social Infrastructure And ServicesFlow Type•Loan

Status

Project lifecycle

Implementation

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Feb 27, 2012
Last repayment
Feb 26, 2015

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownership

Funding agencies

State-owned Commercial Banks

  • Industrial and Commercial Bank of China (ICBC)

Receiving agencies

Joint Venture/Special Purpose Vehicles

  • Netherlands-incorporated Special Purpose Vehicle of PDVSA

Insurance providers

State-owned companies

  • China Export & Credit Insurance Corporation (Sinosure)

Collateral providers

State-owned companies

  • Pétroleos de Venezuela S.A. (PDVSA)

Loan desecription

ICBC provides $1.5 billion oil-backed pre-export loan facility to PDVSA special purpose vehicle

Interest type•UnknownMaturity•3 years

Collateral

The pre-export finance (PXF) facility was collateralized against PDVSA's future oil sales to China OIl, which were to be deposited in a collection account and a debt service reserve account (DSRA). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited.

Narrative

Full Description

Project narrative

On February 27, 2012, PDVSA entered into a $1.5 billion ICBC oil-backed pre-export loan facility agreement with a special purpose vehicle (SPV) that is registered in the Netherlands but controlled (owned) by PDVSA. The facility (loan) carried a 3 year maturity and an unknown interest rate. The three-year term loan was backed a credit insurance policy from Sinosure. It was also collateralized against PDVSA's future oil sales to China Oil, which were to be deposited in a collection account and a debt service reserve account (DSRA). Due to the potential scale of excess cash proceeds from oil sales to China Oil (beyond that which was needed for loan repayment purposes), the collection account was subject to highly negotiated refund mechanisms. The orphan SPV structure was put in place to accommodate PDVSA’s negative pledge commitment to other lenders.

Staff comments

1. A pre-export finance (PXF) facility is an arrangement in which a commodity producer gets up-front cash from a customer in return for a promise to repay the customer with that commodity (possibly at a discount) in the future. PXF funds may be advanced by a lender or syndicate of lenders to a commodity producer to assist the company in meeting either its working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or its capital investment needs (for example, investment in plant and machinery and other elements of infrastructure). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited. There are two key documents in prepayment finance transactions: a contract providing for the advance payment by the offtaker to the producer for the purchase of goods/commodities (the 'Prepayment Contract'), and a loan agreement between a lender and the offtaker (the 'Offtaker Loan Agreement') under which the advance payment is financed. 2. One source (Correo Del Orinoco) indicates that a $1.5 billion ICBC loan that was issued in February 2012 was earmarked for the construction of housing in Fuerte Tiuna. However, the ICBC facility (loan) agreement for the construction of housing in Fuerte Tiuna was signed in March 2011 (as captured via Record ID#37915). For the time being, AidData treats these as two separate ICBC loans. However, this issue warrants further investigation. 3. Orphan SPVs are used in securitization transactions where the notional equity of the SPV is deliberately handed over to an unconnected third party who themselves have no control over the SPV; thus, the SPV becomes an "orphan" whose equity is controlled by no one. 4. Evidence of the provision of a Sinosure credit insurance policy can be found at https://brill.com/display/book/edcoll/9789004373792/front-9.xml