Bank of China contributes $75 million to $1 billion syndicated loan to Petron Corporation for refinancing purposes

On June 16, 2017, a syndicate of 29 banks — including the Hong Kong and Manila Branches of Bank of China (BOC) — signed a $1 billion term loan agreement with Petron Corporation (a Philippine oil refining and marketing firm) for refinancing purposes. The loan carried a maturity of five years and a grace period of two years. it had an amortizing repayment profile and an interest rate of LIBOR plus a margin of 120 basis points (bps). BOC, through its Hong Kong and Manila Branches, contributed $75 million to the loan syndicate. In addition to BOC, the following three lenders are known to have contributed to the 29 bank syndicate: Australia and New Zealand Banking Group (ANZ), Standard Chartered Bank PLC, and Sumitomo Mitsui Banking Corporation (SMBC). SMBC contributed $100 million. BOC, ANZ, Standard Chartered, and SMBC all served as the underwriters, mandated lead arrangers, and bookrunners. Syndication was launched on May 16, 2017 as a $600 million loan, but was oversubscribed and up-sized during syndication to $1 billion. 25 lenders joined in syndication. On June 28, 2017, the borrower drew down $600 million; it used the drawdown to pay the outstanding balances of a 2014 $115 million loan and a 2015 $550 million loan. On October 10, 2017, the borrower drew down the remaining $400 million; it used the drawdown to settle the ₱20,000 PHP-denominated 2010 notes maturing in November 2017. In July 2020, Petron received a warning of a possible covenant breach for a 2019 $800 million loan (to which the Hong Kong branch of Bank of China contributed -- see Project ID#98533) and the June 2017 $1 billion loan. Then, on August 27, 2020, Petron sent a waiver request to the lenders to remove the debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) covenant, which required that Petron manage a leverage ratio under 6.5 times. At the time, Petron's leverage ratio was 7.3 times. Petron blamed the COVID-19 pandemic for its weaker financial performance, claiming that the aviation industry's major downturn had led to reduced demand for oil. On May 31, 2019, Petron drew down another $236 million from the 2019 loan to partially repay the $1 billion loan. In 2020, Petron repaid $221 million and $148 million payments on the loan. In 2021, it made partial principal payments of $86 million and $57 million. Specifically, on August 26, 2020, Petron entered into a $150 million loan agreement, the proceeds which were to used to prepay the part of the 2017 $1 billion loan.

Additional details

1. Petron Corporation is the largest oil refining and marketing company in the Philippines, supplying more than a third of the country's oil requirements. It operates a refinery in Limay, Bataan with a rated capacity of 180,000 barrels per day. 2. 6-month LIBOR is assumed and average 6-month LIBOR in June 2017 was 1.432%. Therefore, the all-in interest rate has been coded as 1.432% + 1.2% (120 basis points), or 2.632%.

Number of official sources

5

Number of total sources

9