ICBC, BOC, and Agricultural Bank of China participate in $1.2 billion syndicated pre-export finance facility to Uralkali for general corporate purposes and debt refinancing

On April 29, 2016, ICBC, Agricultural Bank of China, and BoC participated in a $1.2 billion syndicated pre-export finance (PXF) facility agreement with PJSC Uralkali, a Russian potash producer. The PXF facility has a maturity of 5 years and an annual interest rate of LIBOR + a 3.25% margin. The proceeds from the facility were to be used by the borrower for general corporate purposes, including debt refinancing. The average 6-month LIBOR rate in April 2016 was 0.903%, so the all-in interest rate has been calculated as 0.903% + 3.25% = 4.153%. The loan was signed with 16 international banks. ING Bank N.V., Natixis and AO UniCredit Bank acted as Global Coordinators. Coordinating Mandated Lead Arrangers and Bookrunners of the pre-export finance facility were ING Bank N.V., Natixis, AO UniCredit Bank, Sberbank Europe AG, Societe Generale Corporate & Investment Bank and Public Joint-Stock Company Rosbank. Bank of China (Hungary) Close Ltd, Credit Agricole Corporate and Investment Bank and Intesa Sanpaolo Bank Ireland Plc joined the facility as Mandated Lead Arrangers. Bank of America Merrill Lynch International Limited, AO Citibank, Commerzbank AG Filiale Luxemburg, Deutsche Bank AG (Amsterdam Branch), and AO Raiffeisenbank became Lead Arrangers and IKB Deutsche Industriebank AG, Agricultural Bank of China (Moscow) Limited and Bank ICBC (Joint Stock Company) acted as arrangers of the facility. ING Bank N.V. also acted as Documentation Agent, Facility and Security Agent. AO UniCredit Bank also acted as a Passport Bank.

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. AidData has coded this transaction as collateralized debt because it is a PXF facility and ING Bank N.V. was selected as the security agent (i.e. collateral agent). When lenders take collateral as security for their loans, a collateral/security agent is often appointed to enforce rights against the collateral in the event of the borrower’s default under the loan. 4. Assuming that the twelve lenders contributed equal amounts ($75,000,000) to the loan syndicate, it is likely that the 3 Chinese lenders contributed $225 million together. AidData has not recorded this transaction amount as it likely double counts a 2015 commitment from Chinese financiers to Uralkali (captured via Project ID#67093), especially since this loan was used for refinancing existing debts of Uralkali.

Number of official sources

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Number of total sources

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