CASE STUDY: KNPC Seals US$6.25bn Loan in Largest ECA-Backed Corporate Transaction Ever
Bonds & Loans
Published: 13 June 2017 03:46
Kuwait National Petroleum Company’s (KNPC) US$6.245bn ECA-backed loan was a triumph for the company’s Clean Fuels Project and the region’s credit markets, setting a new record for the largest ECA-backed corporate loan to date.
In late 2016, KNPC sought to complete the debt financing portion of the company’s flagship Clean Fuels Project.
The Project includes plans to modernise the Mina Al Ahmadi oil refinery located in Al Ahmadi Governorate, south of the country, to make it meet stringent environmental requirements.
Total debt financing for Project is estimated to be around US$10bn.
In a follow-on to the company’s KWD1.2bn (approx. US$4bn) dual-tranche loan signed last year, KNPC, advised by NBK Capital, selected a group of international banks to help arrange a debt financing transaction in the area of US$6bn.
The financing package, which carries a fully amortising structure with a 2-year grace period and 10-year repayment period, included coverage from four export credit agencies (ECAs) including Atradius Dutch State Business N.V., Korea Trade Insurance Corporation (K-Sure), SACE, and UK Export Finance.
On the back of positive meetings with international lead arrangers and with strong support from a range of ECAs, KNPC was able to secure a final funding package of US$6.245bn.
The structured facility has a door-to-door tenor of 12 years and included a US$1bn club loan, used for the acquisition of Japanese equipment from JGC Corporation and partners, provided by Japan Bank for International Cooperation (JBIC), SMBC, Bank of Tokyo-Mitsubishi UFJ, Mizuho, and HSBC (Tokyo branch). Nippon Export and Investment Insurance (NEXI) provided 100% political and 95% commercial risk insurance on US$500mn in loans provided by the five Asian lenders.
The structured finance facility, which was oversubscribed, is said to be the largest ECA-backed corporate loan to date, and concludes the funding of KNPC’s Clean Fuels Project. It was a significant funding achievement, particularly given the market volatility seen between November 2016 and March 2017, when the Japanese ECA agreement was signed, and the multi-jurisdiction nature of the financial stakeholders.
Once finalized, the Project will increase the combined capacity of the upgraded and integrated refineries from 736,000 barrels per day to 800,000 barrels per day, making this a landmark transaction for Kuwait’s credit markets and the country’s oil sector.
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