CASE STUDY: KNPC Seals USD6.245bn Loan in Largest ECA-Backed Corporate Transaction Ever
Bonds & Loans
Published: 5 December 2017 08:49
Kuwait National Petroleum Company’s (KNPC) USD6.245bn ECA-backed loan was a triumph for the company’s Clean Fuel 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 Fuel Project.Background
The Project involves modernisation of the Mina Al Ahmadi and Mina Abdullah oil refineries of KNPC located in Al Ahmadi Governorate, south of the country, to make their products meet stringent environmental requirements.
Total debt financing for the Project is estimated to be around USD10bn.
In a follow-on to the company’s KWD1.2bn (approx. USD4bn) dual-tranche loan signed last year, KNPC, advised by NBK Capital, selected a group of international banks to help arrange a debt financing transaction to the tune of USD6.245bn.
The financing package, which is based on a fully amortising structure, is supported by seven export credit agencies (ECAs) – Atradius Dutch State Business N.V., Export-Import Bank of Korea (KEXIM), the Japan Bank for International Cooperation (JBIC), Korea Trade Insurance Corporation (K-Sure), Nippon Export and Investment Insurance, SACE, and UK Export Finance. JBIC and KEXIM extended direct financing to KNPC while the other agencies provided cover to commercial bank lenders involved in the transaction.
The transaction is said to be the largest ECA-backed corporate financing to date. It incorporates a substantial USD 3bn K-sure facility, which, together with the USD 1bn KEXIM direct loan, is supporting 5 South Korean EPC contractors involved in the Project. It was a significant achievement, particularly given the multi-jurisdictional nature of the financial stakeholders and the number of parties involved.
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 completed, 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 producing higher value products, making this a landmark transaction for Kuwait’s credit markets and the country’s oil sector.
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