ICBC contributes to $1.3 billion syndicated receivables-backed trade finance facility to COCOBOD for 2018/2019 crop season and payment for other liabilities (Linked to Project ID#92018)

On September 20, 2018, a consortium of 21 financial institutions — including the Industrial and Commercial Bank of China (ICBC) and Bank of China (BOC) — finalized a $1.3 billion receivables-backed trade finance facility (loan) agreement with Ghana Cocoa Board (COCOBOD), a state-owned enterprise and the world's second-largest cocoa producer, for (a) purchasing cocoa from farmers during the 2018/2019 crop season and (b) payment for other liabilities. The borrowing terms included a 7-month repayment period, a 0.35% commitment fee, a 0.625% flat (upfront) fee, and an interest rate of LIBOR plus 60 basis points. The Government of Ghana issued a sovereign guarantee in support of the loan. The loan is also secured by (i.e. collateralized against) receivables from future cocoa sales contracts. According to COCOBOD's 49th Annual Report, the borrower "successfully repaid the loan with interest within the agreed terms of the facility" (p. 10). The loan was divided into three tranches in which the first $650 million tranche would land in the Bank of Ghana's account on October 4, 2018, the second $450 million tranche would land in November 2018, and the third $200 million tranche would land in December 2018. Participants in the bank syndicate included Coöperatieve Rabobank U.A. (senior mandated lead arranger), Crédit Agricole Corporate and Investment Bank, Natixis, Sumitomo-Mitsui Banking Corporation, Standard Bank of South Africa, Bank of China Limited (initial mandated lead arranger), Commerzbank Aktiengesellschaft (senior mandated lead arranger), DZ Bank AG Deutsche Zentral-Genossenchaftban (senior mandated lead arranger), FirstRand Bank, Industrial and Commercial Bank of China (initial mandated lead arranger), Intesa Sanpaolo Bank (senior mandated lead arranger), Standard Chartered Bank of Ghana (initial mandated lead arranger), the Bank of Tokyo-Mitsubishi UFJ Ltd (senior mandated lead arranger), Société Générale (senior mandated lead arranger), ABN Amro Bank N.V (initial mandated lead arranger), Ned Bank Limited, State Bank of India, Ghana International Bank (initial mandated lead arranger) Ecobank, and Barclays Bank. Chief Executive of COCOBOD, Jospeh Boahen Aidoo, noted that the agreement would be used to purchase at least 900,000 metric tons of cocoa from Ghana farmers. AidData estimates that ICBC contributed $61,904,761 (captured via project ID#86573), and Bank of China also contributed $61,904,761 (captured via project ID #92018).

Additional details

1. AidData estimated the all-in interest rate as follows: 2.569% (avg. 6-month USD LIBOR in Sep. 2018) + 0.60% (given margin) = 3.169%. 2. Reuters and other media sources cite a 12-month repayment period with an interest rate of LIBOR plus 0.625 percent. However, the Parliament of Ghana and COCOBOD (source #150885) refer to a 7-month repayment period, an interest rate of LIBOR plus 60 basis points (0.60 percent), and a 0.625 percent flat fee. AidData relies on the information provided by official sources (Parliament of Ghana and COCOBOD). 3, The individual contributions of the banks that participated in the lending syndicate are unknown. For the time being, AidData assumes equal contributions ($61,904,761) across all 21 members of the syndicate, which implies that the total financial commitment from the two Chinese state-owned banks was $123,809,522. Project ID#86573 captures ICBC's individual contribution while project ID#92018 captures BOC's individual contribution. 4. Ghana’s cocoa production is regulated by the Ghana Cocoa Board (COCOBOD), an organization separate from the Ministry of Food and Agriculture that is wholly owned by the Government of Ghana. COCOBOD does not purchase any of the cocoa which is exported, but is responsible for assuring the quality of the product. To ensure the high quality of Ghana’s cocoa exports, the COCOBOD oversees horticulture practices and regulates the use of pesticides and fertilizer. In addition, COCOBOD sets the producer prices for cocoa farmers and, through a subsidiary, oversees the marketing of cocoa. The operations of the COCOBOD are funded through the receipt of a percentage of the revenue received from cocoa exports, but all profits after covering expenses are passed onto the Government of Ghana in the form of export taxes. 5. In August 2017, COCOBOD told the country’s parliament it was in financial distress due to obligations that included servicing China Eximbank loans for the Bui Dam Construction Project (captured via Project ID#183, ID#30801, ID#30709, and ID#30086). 6. The contractual terms outlined in a document to the Parliament of Ghana indicate that the security margin is the assignment of cocoa contracts for 110% of the facility amount. 7. The commitment fee is referred to in the source documentation as a ’35% on interest margin’. AidData has assumed that the 0.625% flat (upfront) fee is functionally equivalent to a management fee.

Number of official sources

3

Number of total sources

10