China CITIC Bank contributes to $1 billion syndicated mezzanine syndicated term loan for Tianqi Lithium Corporation to acquire 23.77% ownership stake in Sociedad Quimica y Minera de Chile S.A. (Linked to Project ID #89508, #89509, #95343)

In May 2018, Tianqi Lithium Corporation (TLC) entered into the Sociedad Quimica y Minera de Chile S.A. (SQM) Share Purchase Agreement with Nutrien, pursuant to which TLC agreed to purchase and Nutrien agreed to sell 62,556,568 Series A shares in SQM at a consideration of approximately $4.07 billion (see Project ID #54940). In addition to its cash on hand, TLC financed the consideration for the SQM Transaction through three bank borrowings. On October 26, 2018, the Chengdu Branch of China CITIC Bank Corporation Limited signed a $2.5 billion term loan agreement ("Onshore Syndicated Facility Agreement") with Tianqi Lithium Australia Investments 1 Pty. Ltd. (TLAI1) — a special purpose vehicle and subsidiary of TLC — to support TLC’s acquisition of a 23.77% ownership stake in SQM and thereby help it gain access to a coveted source of supply of metallic lithium, one of the key raw materials for the production of rechargeable batteries for mobile phones and electric vehicles. This $2.5 billion loan is split into a $1.3 billion senior tranche (see Project ID #89508) with a two-year maturity (final maturity date: November 2020) and a $1.2 billion senior tranche (see Project ID #89509). with a three-year maturity (final maturity date: November 2021). The interest rates for these two loans range from LIBOR plus a 2.70% margin to LIBOR plus a 3.70% margin. This $2.5 billion term loan is collateralized against TLC’s 23.77% ownership stake in SQM and a pledge over TLC shares in (i) Shehong Tianqi, (ii) Tianqi Lithium (Jiangsu), (iii) Tianqi Australia Investments 1, (iv) ITS, (v) TLEA, (vi) Chongqing Tianqi, and (vii) Shigatse Zabuye. Moreover, both tranches are backed by a TLC repayment guarantee. A few days later on October 29, 2018, five banks — China CITIC Bank International, BNP Paribas, China Minsheng Bank, Industrial and Commercial Bank of China, and Societe Generale — signed a $1 billion mezzanine syndicated term loan facility agreement ("Offshore Syndicated Facility Agreement") with Tianqi Lithium Australia Investments 2 Pty. Ltd. (TLAI2) — a special purpose vehicle and subsidiary of TLC. China CITIC Bank's and ICBC's combined contribution to this loan is recorded in Project ID #89512. This syndicated loan has a two-year maturity (final maturity date: November 2020). The interest rates for this loan range from LIBOR plus a 2.70% margin to LIBOR plus a 3.70% margin. The $1 billion syndicated mezzanine syndicated term loan is collateralized against an account pledge of ITS, TLC’s 23.77% ownership stake in SQM, and a pledge over TLC shares in (i) Tianqi Xinlong, (ii) Tianqi Australia Investments 2, (iii) TLEA, (iv) Chongqing Tianqi, and (v) Shigatse Zabuye. This loan is also backed by a TLC repayment guarantee. After signing the agreements, TLAI1 fully drew down on the $1.3 billion senior tranche (known as ‘facility A’) and the $1.2 billion senior tranche (known as ‘facility B’). TLAI2 fully drew down on the $1 billion syndicated mezzanine syndicated term loan (known as 'facility C'). Since the end of 2019, the price of lithium products have been in decline, Tianqi Lithium's liquidity supply began running low, and their debt ratio continued to rise. Therefore, the began having issues meeting their repayment obligations on these three loan facilities. Then, pursuant to an Amendment and Extension Deed, the parties to these three facilities agreed to (i) extend the maturity dates of facility A and facility C to November 26, 2021, subject to automatic extension to November 25, 2022 upon fulfillment of certain conditions, and (ii) extend the maturity date of facility B to November 29, 2023. On July 2, 2021, the borrowers fulfilled all conditions required referred to in (i) and extended the maturity dates of facility A and facility C to November 25, 2022. The interest rates of the facilities after extension were reset to LIBOR plus 2.00% for each of the facilities, and plus 0.90%, 2.20% and 3.90%, respectively, for facility A, facility B and facility C.

Additional details

1. Tianqi Lithium Australia Investments 1 Pty Ltd（TLAI1) is a limited liability company incorporated in Australia on May 4, 2018, in which Tianqi Lithium Corporation holds a 90.23% equity interest through Tianqi Australia Investments 2 and the remaining 9.77% equity interest is held through Tianqi Lithium Holdings Pty Ltd (TLH). Tianqi Lithium Australia Investments 2 Pty Ltd （TLAI2) is a limited liability company incorporated in Australia on May 4, 2018, which is a wholly-owned subsidiary of Tianqi Lithium Corporation (TLC). 2. Sociedad Quimica y Minera de Chile S.A. is a publicly held company incorporated in Chile on June 29, 1968 and listed on the Santiago Stock Exchange, the Santiago Electronic Stock Exchange and the New York Stock Exchange. 3. While some sources refer to the $2.5 billion loan as syndicated, other sources identify the Chengdu Branch of China CITIC Bank as the sole lender. For the time being, AidData assumes that the Chengdu Branch of China CITIC Bank was the sole lender. 4. In mezzanine finance, creditors are only able to claim against the company if it default4. s, and only after creditors with senior debt have been repaid. 5. The precise interest rates that apply to facilities A, B, and C are unknown. For the time being, AidData estimates the all-interest rate by adding a 3.2% (the midpoint between a 2.70% margin and 3.70% margin) to average 6-month LIBOR in October 2018 (2.173%). 6. The individual contributions of the banks that participated in the mezzanine syndicated term loan facility are unknown. For the time being, AidData assumes equal contributions ($200 million) across all 5 members of the syndicate, which implies that the total financial commitment from Chinese state-owned banks was $400 million. ICBC's contribution is captured at project ID#95343.

Number of official sources

3

Number of total sources

11