China Development Bank provides a $7 billion USD senior secured loan to Shining Prospect Pte. Ltd. to facilitate its joint purchase with Alcoa of a 12% ownership stake in Rio Tinto (Linked to Record ID#50039, #96188, and #96189)

Project narrative

In January 2008, Aluminum Corporation of China (Chinalco) and United States-based Alcoa Inc. jointly purchased a 12% ownership stake (9% stake for Chinalco) in Rio Tino plc, a British-Australian mining company, the world's third largest mining firm and second largest by market value, for a consideration of $14.05 billion USD or £60 GBP per share. Shining Prospect Pte. Ltd. acquired approximately 12.00% of the outstanding ordinary shares of Rio Tinto on January 25, 2008, as announced by Chinalco and Alcoa on February 1, 2008. The acquisition was funded with the proceeds from a $3.6 billion USD loan from China Development Bank (CDB) to Chinalco, a $2.4 billion USD convertible loan from CDB to Chinalco, a $7.0 billion USD loan under a $7.0 billion USD Term Loan Facility provided by CDB to Oriental Prospect Pte. Ltd., and the issuance of a convertible note by Shining Prospect Pte. Ltd. to Alcoa Inc. in the aggregate amount of $1.2 billion USD. On January 30, 2008, CDB entered into a $3,600,000,000 USD Self-Operated Foreign Exchange Loan Contract with Chinalco to support the acquisition. This loan carried a maturity period of two years beginning from January 31, 2008 and concluding January 30, 2010 and an interest rate based on the 6-month USD LIBOR plus a margin of 0.5%. The drawdown period was one month, from January 31, 2008 to February 29, 2008. Chinalco's drawdown plan was $3 billion USD on January 31, 2008 and $600 million USD on February 1, 2008. The interest periods of this loan were six months each, beginning from the date of first drawdown (January 31, 2008). Interest payment dates were due on July 31st and January 31st of each year of the loan. $1.8 billion USD of the principal was due on January 31, 2009 and $1.8 billion USD was due on January 30, 2010. If the borrower failed to repay the due principal, interest, and fees of the loan, CDB would charge an interest on overdue payment at a rate of 6-month USD LIBOR plus a margin of 1.5%; and if continuing to fail to repay, CDB would charge Chinalco compounded interest on the overdue payments. Record ID#50039 captures the $3.6 billion USD Foreign Exchange Loan. On January 30, 2008, CDB entered into a $2,400,000,000 USD Self-Operated Foreign Exchange Loan Contract with Oriental Prospect Pte. Ltd. — a special purpose vehicle and wholly owned subsidiary of Chinalco — to support the acquisition. This loan carried a maturity period of three years beginning from February 1, 2008 and concluding as of January 31, 2011 and an interest rate based on the 6-month USD LIBOR plus a margin of 0.5%, inclusive of both the cash interest rate and the capital interest rate. The drawdown period was one month, from January 31, 2008 to February 29, 2008. Oriental Prospect's drawdown plan was to fully drawn down $2.4 billion USD on February 1, 2008. The interest periods of this loan were six months each, beginning from the date of first drawdown (February 1, 2008). Interest payment dates were due on July 31st and January 31st of each year of the loan. The entire loan balance was due on January 31, 2011. If the borrower failed to repay the due principal, interest, and fees of the loan, CDB would charge an interest on overdue payment at a rate of 6-month USD LIBOR plus a margin of 1.5%; and if continuing to fail to repay, CDB would charge the borrower compounded interest on the overdue payments. Record ID#96188 captures the $2.4 billion USD Foreign Exchange Loan. This loan carried a Share Conversion Option; at any time following disbursement, CDB had the right to convert all or parts of the outstanding loan amount (excluding any portion of interest capitalized and recorded into the loan balance) into a specified number of shares of Oriental Prospect Pte. Ltd., reducing the principal amount outstanding under the loan. It was expected and understood by the parties that, upon full conversion of the outstanding loan amount, CDB would hold no more than 20% of the outstanding share capital of Oriental Prospect. On February 3, 2008, CDB entered into a $7,000,000,000 USD facility (Parent Loan) agreement with Oriental Prospect Pte. Ltd. to support the acquisition. CDB served as arranger, agent, sole lender, and security agent. This loan carried a maturity period of three years and an interest rate based on LIBOR plus a margin of 1% per annum. Record ID#96189 captures the $7 billion USD loan. In connection with this agreement, on February 3, 2008 CDB and Oriental Prospect entered into a Share Charge Over Shining Prospect Pte. Ltd. and a Debenture, pursuant to which Oriental Prospect granted CDB a security interest in certain present and future assets of Oriental Prospect, including shares of Shining Prospect, as security for the discharge of Oriental Prospect’s secured obligations. Under a Guarantee executed and delivered to CDB on February 3, 2008, Chinalco guaranteed Oriental Prospect’s obligations under the facility. In connection with the facility, in the sponsor undertaking, executed on February 3, 2008, Chinalco agreed and covenanted that Oriental Prospect will at all times own 100.00% of the share capital of Shining Prospect. In addition Chinalco agreed to cause all other persons who directly or indirectly own any shares of Oriental Prospect to undertake that Oriental Prospect will at all times own 100.00% of the share capital of Shining Prospect. The relations among security interests granted under the facilities were governed by an Intercreditor Agreement among CDB, Oriental Prospect, and Shining Prospect, were executed on February 3, 2008. On February 3, 2008, CDB entered into a $7,000,000,000 USD Senior Secured Facility Agreement with Shining Prospect Pte. Ltd. — a special purpose vehicle and wholly owned subsidiary of Oriental Prospect Pte. Ltd. — to support the acquisition. CDB served as arranger, agent, sole lender, and security agent. This loan carried a maturity period of five years and an interest rate based on LIBOR plus a margin of 1.20% per annum. As of February 2008, Shining Prospect Pte. Ltd. had borrowed, but not used, an aggregate amount of $2.0 billion USD under the facility. Record ID#96190 captures the $7 billion USD loan. In connection with this agreement, on February 3, 2008, CDB and Shining Prospect Pte. Ltd. entered into a Security Over Shares Agreement and a Debenture , pursuant to which Shining Prospect Pte. Ltd. granted CDB a security interest in certain present and future assets of Shining Prospect Pte. Ltd., including certain Ordinary Shares purchased by it, as security for the discharge of Shining Prospect Pte. Ltd.’s secured obligations. For purposes of creating the security interest over the Ordinary Shares, Shining Prospect Pte. Ltd. created a securities account and appointed Lehman Brothers International (Europe) as custodian for such securities account pursuant to a custody agreement. Previously, on November 8, 2007, BHP Billiton Ltd. had proposed to takeover Rio Tinto and create a $317 billion USD mining company. Some analysts argued that Chinalco and Aloca's acquisition would deter BHP's proposed takeover as BHP would require an unsolicited or hostile bid to receive approval from over 90% of Rio's investors. At the time of the acquisition, this was reportedly the largest foreign investment made by a Chinese company. Later, in 2009, Chinalco attempted to purchase another 9% stake in Rio, backed by a $21 billion USD loan from four Chinese state-owned banks. The purchase fell through and the loan was cancelled. Record ID#50022 captures Agricultural Bank of China's contribution to the $21 billion USD loan. Record ID#96191 captures Bank of China's contribution. Record ID#96192 captures the Export-Import Bank of China's contribution. Record ID#96193 captures CDB's contribution.