Bank of Communications contributes to EUR 900 million syndicated loan to help Wanhua obtain full control of BorsodChem (Linked to Record ID#89909, #89908, and #92451)

Project narrative

On June 25, 2011, Wanhua Industrial Group (Wanhua) signed an EUR 1.1 billion syndicated loan agreement (‘financial service cooperation agreement’) with Bank of China on behalf of four Chinese state-owned banks: Bank of China (BOC), Bank of Communications, the Industrial and Commercial Bank of China (ICBC), and the Export-Import Bank of China. The purpose of the syndicated loan was to help Wanhua obtain full control of BorsodChem Zrt. — a chemical raw material manufacturing company headquartered in Kazincbarcika, Northern Hungary. The borrowing terms of the loan are unknown. However, it is known that an EUR 900 million tranche from BOC, Bank of Communications, and ICBC was used by Wanhua Industrial Group to obtain a 96% ownership stake in BorsodChem Zrt. As a result of this acquisition, Wanhua became the third largest isocyanate producer in the world. Record ID#89908 captures BOC's estimated contribution, Record ID#92451 captures ICBC's estimated contribution, and Record ID#92454 captures Bank of Communications' estimated contribution. The merger was already complete as of January 31, 2011 (despite the ‘cooperation agreement’ not being signed until June 2011). After the completion of the merger, BorsodChem Zrt. was renamed Wanhua-BorsodChem (匈牙利宝思德化学公司). A second, EUR 200 million ($217 million) tranche from China Eximbank was issued on November 28, 2017 and used to support technical reforms and the day-to-day operations of BorsodChem (captured via Record ID#89909). This working capital loan was provided directly to Wanhua-BorsodChem, with Wanhua Industrial Group serving as guarantor. Acquired in 2006 for EUR 1.6 billion by First Chemical Holding (FCH), the heavily indebted BorsodChem ran into severe financial difficulties two years later when financial markets seized up. In 2009, Wanhua — considered a direct competitor of BorsodChem — began buying up large chunks of BorsodChem’s mezzanine debt, giving it an influential voice in restructuring talks. Then, in mid-February 2010, Wanhua acquired a 38% stake in FCH, the holding company of BorsodChem, which is controlled by Permira, the UK buy-out fund, and VCP Capital Partners. FCH and Wanhua signed debt-equity swap agreement that provided EUR 140 million in capital for a new chemical plant in eastern Hungary. Wanhua was to inject an initial EUR 30 million ($41 million) into BorsodChem immediately, followed by a second tranche of EUR 110 million within the next five weeks. As a result, Wanhua become a ‘significant’ minority owner in BorsodChem and was hold a call option over the buy-out groups’ stakes in BorsodChem within the next two years. According to Wanhua's 2017 Annual Report, Wanhua Industrial acquired the remaining 4% equity stake in BorsodChem in 2016.