BoC, ICBC, CCB participate in $655 million syndicated pre-export finance facility to Uralkali for general corporate purposes

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 5 other international banks, Natixis, ING Bank N.V., PJSC ROSBANK and Société Générale, JSC Nordea Bank, Commerzbank, IKB. 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.

Additional details

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 transaction amount is calculated by dividing $530 million by 8 (contributed by 8 lenders), multiply by 2 (contributions from ICBC and China Construction Bank) and add $100 million (Bank of China's contribution). 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%.

Number of official sources

2

Number of total sources

7