ICBC and BoC participate in $850 million syndicated pre-export finance facility to Uralkali for debt financing and general corporate purposes

In August 2017, ICBC and BoC were two of eleven banks that participated in a syndicated pre-export finance (PXF) facility agreement worth $850 million with PJSC Uralkali, a Russian potash producer. The PXF facility has a maturity of 5 years and an annual interest rate of LIBOR + a 2.2% margin. The proceeds from the facility were to be used by the borrower for general corporate purposes and refinancing Urakali's existing loans. The average 6-month LIBOR rate in August 2017 was 1.454%, so the all-in interest rate has been calculated as 1.454% + 2.2% = 3.654%. Other banks in the syndicate include Commerzbank AG, Credit Agricole Corporate and Investment Bank, ING Bank NV, Natixis, Societe Generale Corporate & Investment Bank / Rosbank PJSC and UniCredit Bank Bank of America Merrill Lynch International Limited, Bank IC ), and Raiffeisenbank JSC. BoC and IKB Deutsche Industriebank AG acted as creditors for the loan.

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 individual contributions of the seven banks to the syndicated loan are unknown. Assuming that the seven lenders contributed equal amounts ($121,428,571) to the loan syndicate, the collective contribution of the two Chinese state-owned banks will be $242,857,143. AidData has not recorded this transaction amount as it likely double counts a 2015 commitment from Chinese financiers to Uralkali, captured in #67093, especially since this loan was used for refinancing existing debts of Uralkali.

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