Narrative
Full Description
Project narrative
On April 20, 2015, China Construction Bank (CCB), the Industrial and Commercial Bank of China (ICBC), and Bank of China (BoC) participate in a $530 million syndicated pre-export finance (PXF) facility agreement with PJSC Uralkali, a Russian potash fertilizer producer. The syndicate included seven other international banks, Natixis, ING Bank N.V., PJSC ROSBANK and Société Générale, JSC Nordea Bank, Commerzbank, IKB. Record ID#67093 captures the estimated financial commitment of China Construction Bank, Record ID#100872 captures the estimated financial commitment of Bank of China, and Record ID#100873 captures the estimated financial commitment of ICBC. Then in, June 2015, Uralkali increased the face value of the facility to $630 million by signing an increase confirmation of $100 million with Bank of China. Then, on June 9, 2015, the facility was increased by an additional $25 million to a total $655 million. This contribution came from Rosbank. The facility included the ability to be extended up to a total of $800 million. However, as of the end of 2015, the face value of the facility was still $655 million. The PXF facility has a maturity of 4 years and an annual interest rate of LIBOR + a 3.3% margin. The proceeds from the facility were to be used by the borrower for general corporate purposes.
Staff comments
1. Uralkali is one of the world’s largest potash producers and exporters. The company’s assets consist of 5 mines and 7 ore treatment plants in the towns of Berezniki and Solikamsk (Perm Region, Russia). 2. 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. Due to to various international sanctions imposed upon Russia, PXF facilities are one of the fews ways in which commodity producers (borrowers) can borrow in foreign currency. 3. The individual contributions of Bank of China, China Development Bank, and ICBC to the $655 million syndicated loan are unknown. For the time being, AidData assumes equal contributions to the $530 million loan ($53 million) across all ten known members of the syndicate, with an additional $100 million from Bank of China and $25 million from Rosbank. 4. The average 6-month LIBOR rate in April 2015 was 0.405%, so the all-in interest rate has been calculated as 0.405% + 3.3% = 3.705%.