Bank of China (Hong Kong) contributes to a $800 million USD syndicated loan to Petron Corporation for general corporate and refinancing purposes

On May 10, 2019, a syndicate of 24 lenders — including the Bank of China (Hong Kong) Limited (BOCHK) — signed a $800 million USD term loan facility agreement with Petron Corporation — a Philippine oil refining and marketing firm — for general corporate and refinancing purposes. This loan carried a maturity period of five years, a final maturity date in May 2024, a grace period of two years with first repayment due on May 15, 2021, a repayment schedule of seven equal semi-annual installments, and an interest rate of LIBOR (repriced every one, two, and six months) plus a margin of 95 basis points (bps). The proceeds were to be used by the borrower for general corporate purposes and refinancing purposes. In addition to BOCHK, the following five lenders are known contributed to the loan syndicate out of the 24 total lenders: Australia and New Zealand Banking Group (ANZ), DBS Bank, Mizuho Bank, Standard Chartered Bank, and Sumitomo Mitsui Banking Corporation (SMBC). BOCHK, ANZ, Standard Chartered, and SMBC served as original mandated lead arrangers and bookrunners. DBS and Mizuho joined as mandated lead arrangers and bookrunners. General syndication was launched on February 25, 2019 for a $700 million USD loan, which was fully underwritten by the six banks, but the loan was up-sized at financial close. 18 lenders joined in syndication. On May 15, 2019, the borrower made an initial $300 million USD drawdown; the proceeds of this drawdown were used to refinance Petron's existing dollar-denominated bilateral short-term loans. On May 31, 2019, the borrower drew another $236 million USD; the proceeds of this drawdown were used to partially prepay its 2017 $1 billion USD term loan. Then, on July 10, 2019, the borrower drew the remaining $264 million USD; the proceeds of this drawdown were used to refinance various peso-denominated short -term loans and for general corporate purposes. In July 2020, Petron received a warning of a possible covenant breach for the $800 million USD loan and a 2017 $1 billion USD loan (which Bank of China was a contributor to; see Project ID#98341). Then, on August 27, 2020, Petron sent a waiver request to the lenders to remove the debt to Earnings before interest, taxes, depreciation, and amortization (EBITA) covenant, which required Petron to manage a leverage ratio under 6.5 times; its then-current leverage ratio was 7.3 times. Petron blamed the COVID-19 pandemic for its weaker financial performance, saying that the aviation industry's major downturn had led to reduced demand for oil. As of 2020, the borrower had repaid $115 million USD under the loan. As of 2021, the borrower had repaid $228 million USD. As of 2022, the borrower had repaid $343 million USD. Specifically, on August 26, 2020, Petron entered into a $150 million USD loan agreement, the proceeds which were to used to prepay the part of the 2017 $1 billion USD loan and the $800 million loan. On December 15, 2022, Petron used $228 million USD from a $550 million USD term loan facility to further partially repay the $800 million USD loan. On February 3, 2023, Petron used $25 million USD from the $550 million USD loan to partially repay the $800 million USD 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. The individual contribution of the 24 lenders to this $800 million USD syndicated loan is unknown. For the time being, AidData has estimated the contribution of BOCHK by assuming that each lender contributed an equal amount ($33,333,333.3333 USD) to the syndicated loan. 3. As the loan was fully disbursed as of July 10, 2019, AidData has marked the project_status field as Completion. 4. 1. A 6-month LIBOR was assumed, as the LIBOR was priced at 1-month, 3-month, or 6-month. The average 6-month LIBOR for May 2019 was 2.568%. Therefore, the interest rate has been coded as 2.568% + 0.95%, or 3.518%.

Number of official sources

4

Number of total sources

7