CDB contributes $150 million to $800 million syndicated loan to Black Gold Drilling for two semi-submersible drilling platforms (linked to Project ID#59968)

On October 25, 2007, Black Gold Drilling LLC — a special purpose vehicle and subsidiary of Schahin (a Brazilian construction firm) — signed a $800 million senior, secured, syndicated loan agreement with about 15 banks to finance the construction of two semi-submersible drilling platforms. China Development Bank (CDB) contributed $150 million to the syndicate. The loan carried a 10 year maturity and an interest rate of LIBOR plus a 2.375% margin prior to completion of construction for the platforms (3.5 years), and LIBOR plus a 2% margin post-completion. The interest rate had the potential to drop further depending on the platforms' profit margins during operation (5-7 years). Additionally, a $80 million completion letter of credit, a completion guarantee from Schahin Engenharia, and a comfort letter from Schahin were all provided to mitigate risk for lenders. The participants in the loan syndicate included four bookrunners/mandated lead arrangers, Mizuho Financial Group, Standard Chartered Bank, UniCredit, and WestLB, all of which contributed about $57.86 million. Dexia Group served as the senior lead arranger, and KfW and HSH-Nordbank served as arrangers, and also contributed about $57.86 million each. BBVA, SanPaolo IMI, Shinhan, and Itau BBA were all co-arrangers, and contributed $50 million, $50 million, $40 million, and $30 million respectively. Caterpillar and Nordkap were participants, contributing $15 million and $10 million respectively. The International Finance Corporation (IFC) contributed a $50 million loan as a participant as well. Some sources indicate multiple Chinese banks were involved in the syndicate, one source specifying the China Construction Bank. The proceeds of the loan were to be used by the borrower to finance the construction of two semi submersible drilling platforms known as Schahin I and Schahin III. Petrobras was expected to use the drilling platforms in the Campos Basin offshore Brazil. The rigs (drilling platforms) were to be built by Singapore’s Yantai Raffles Shipyard Company, with whom two EPC contracts were signed, at its facilities in China. EPC contract terms included performance guarantees issued by Sinosure for 10% of the contract values, liquidated damages equal to 5% of the contract values, and, according to some sources, retention payments equivalent to 15% of the contract values. Schahin I was to be operated under a seven-year contract with Petrobras starting in 2010 and was designed to operate at depths up to 2,000m, with a drilling depth of 7,500 meters below the seabed. The contract was won in a Brazilian-only bid. The Schahin III rig received a five year contract after a bidding process open to international firms. It was designed to operate at a depth of 2,400 meters, respectively, also with a drilling depth of 7,500 meters below the seabed. Construction for both rigs was expected to take 3.5 years. However, on December 18, 2009, Black Gold Drilling refinanced the $800 million due to delays in project implementation. The new loan had borrowing terms of LIBOR plus a 3.38% margin and a tenor of 11 years. The portion of the refinanced loan contributed by CDB is captured in project ID#59968. As with the original loan, several sources indicate additional Chinese banks participated, such as China Construction Bank or Bank of China. While the exact start and end dates of the rigs' construction are unknown, the project was completed, and the rights to the two drilling platforms were sold to ICBC in 2014 through a sale-leaseback transaction in order to repay the loan. Then, on July 13, 2021, a lawsuit was filed against a total of twelve banks (involved in one or both of the syndicates) by several subsidiaries of the Schahin Group. The lawsuit claimed that the banks had collaborated 'with the CEO and CFO of two Schahin Group entities [to sell] the oil rigs to ICBC below fair value when the Schahin Group was in financial distress.'

Additional details

1. This syndicated loan may include other Chinese financiers. The individual bank contributions are taken from a review of the loan in Euromoney's Latin American Oil & Gas Deal of the Year 2007, which add up to $800 million and only include a contribution from CDB. However, IJ Global's reporting indicates multiple Chinese financial institutions were involved in financing, mentioning China Construction Bank in their Yantai surprise article. Further, reporting on the refinanced loan also refers to multiple Chinese banks being involved, but IJ Global's reporting only lists CDB. Lastly, the lawsuit against twelve of the banks involved in one or both of the loans includes Bank of China and China Development Bank as respondents. These issues warrant further investigation. 2. In October 2007, the average 6-month LIBOR was 5.051%. AidData has estimated the all-in interest rate by adding 2.375% to average 6-month LIBOR in October 2007 (7.426%), adding 2% to average 6-month LIBOR in October 2007 (7.051%), and then taking the midpoint between the two (7.2385%). 3. AidData has coded the loan as collateralized because it is referred to as a ‘secured’ loan. 4. The lawsuits related to these drilling rigs have identification number 1:21-cv-06020 (Aj Ruiz Consultoria Empresarial S.A. v. Bank of China Limited et al.) and 1:22-cv-00521 (AJ Ruiz Consultoria Empresarial S.A. v. Banco Bilbao Vizcaya Argentaria, S.A. et al)

Number of official sources

1

Number of total sources

16