Borrower Briefing

5 July 2016

Borrower Briefing Cost of shipping debt only going to keep rising – even for the strongest credits With Kexim and Korea Development Bank’s capital ratios – which have taken vast hits from ship lending – about to be topped up by the state, and many EU banks having to restructure portfolios of non-performing shipping loans, the depth of the lending market for shipping borrowers is at its shallowest for years. And it may become shallower yet. The European Central Bank, having already combed through ship financiers' books during its 2014 Asset Quality Review, is doing another review of shipping loans. Tighter supervisory conditions may follow, dependent on the findings. But despite the lack of funding choice, shipowners are still finding takers for newbuild debt financings – albeit loan pricing is on the increase even for strong credits. Last month Royal Caribbean Cruises signed a $1.453 billion Coface-guaranteed facility to fund construction of two edge-class 117,900 GRT passenger cruise vessels for its subsidiary Celebrity Cruises. The debt is priced at a fixed rate of 322.5bp inclusive of margin – around 70bp higher than the borrower’s €892 million Coface-backed deal in 2013, and the subsequent Coface-backed dollar tranche for the same newbuild in 2015, which priced at a fixed rate of 260bp including margin. Last month Gener8 Maritime also amended and upped a $259.6 million Sinosure-covered 15-year senior secured loan (raised last November) to $385.2 million to complete the financing of six VLCC newbuilds from Shanghai Waigaoqiao Shipbuilding. Citibank, Chexim and Bank of China lead arranged the Gener8 deal which comes with a margin of 200bp over Libor. More surprisingly, Navig8 Chemical Tankers managed to fund a new tanker order in a deal sole lead arranged by ING Bank and with no ECA

support. The deal is rumoured to have priced at 300bp-plus all-in. Although all three deals have little in common in terms of credit strength, they do illustrate the shape of shipping lending and pricing for the coming year at least. All are either ECA-backed or from some of the few commercial bank markets that still have appetite, albeit with caveats, for shipping debt – notably France, China and the Netherlands. And all are priced around or above 300bp all-in. In short, as the lending market gets smaller, the cost of newbuild shipping debt looks set to continue to rise unless more ECA – notably German, Korean and to a lesser extent Japanese - debt returns to the market.

Talking shop – borrower comment Borrower: PhosAgro Sector: Fertilizer production Deal: $250 million pre-export financing Tenor: 4 years Lenders: Societe Generale, Rosbank and UniCredit Financial close: 28 June 2016 Andrey Guryev, CEO, PhosAgro: “The deal priced well and I am pleased that the cost of foreign-currency financing for us has returned to an attractive level. This new PXF will be used for refinancing of existing short-term debt and refinancing of more expensive debt. “It also serves as a benchmark for appetite for PhosAgro and ensures we have a full range of financing options available, in anticipation of our $500 million Eurobond refinancing in 2018.”

Borrower: Sucden Sector: Comodities/Sugar Deal: $400 million revolving credit Tenor: One year plus two one-year extension options Lenders: Rabobank, ING, and Societe Generale Financial close: 21 June 2016

Thierry Bourvis, CFO, Sucres et Denrées (Sucden): “Sugar pricing has increased by roughly 40% since start of 2016. That, coupled with the expansion of the group into cocoa and coffee trading, led us to increase the facility – the RCF was initially launched at $225 million but was so well received by banks it closed substantially oversubscribed. “The strong bank appetite reflected the risk quality (strong balance sheet and results, limited leverage) of Sucden. We are also a growing business with opportunities for bilateral financing above and beyond the revolver, and there is a lot bank liquidity for bilateral short term loans.”

Mandate mill Petrovietnam is out to the bank market for an ECA-backed package for its 1200 MW super critical coal-fired Long Phu 1 power project. HSBC and four other banks have been mandated to coordinate the deal. Tengizchevroil has appointed Mizuho as agent and documentation bank on a $3 billion five- to seven-year club financing. Citigroup has also been appointed accounts bank. The deal is rumoured to be a prepayment facility with JP Morgan as financial advisor. The deal will be part of $20 billion of loan and bond financing to fund TCO's Future Growth Project. JP Morgan, Citigroup and HSBC have been awarded roles on a bond deal. Braathens Aviation is rumoured to have mandated Deutsche Bank and Credit Agricole as joint lead arrangers for an ECA-backed deal to finance delivery of six ATR72-600 deliveries. Delivery of the first aircraft was in mid-June and the remainder are expected between August and December this year. Total Gabon has signed a $340 million six-year revolver, however according to bankers there could still be room for more lenders to join. The deal is short of the borrower’s $500 million initial target. MSC Cruises is rumoured to be looking to mandate a Coface-baced deal to fund construction of two confirmed newbuild orders placed with STX France earlier this year for 200,000gt-plus, dual-powered (diesel-LNG) ships Asian Development Bank (ADB) has appointed SMBC as its co-adviser on the East Container Terminal (ECT) PPP project in Colombo Port. The two parties signed a co-advisory services agreement on June 27. Edotco Investments (Labuan) a once-removed subsidiary Malaysian telecommunications company Axiata Group – has mandated Deutsche Bank to lead arrange a $100 million three-year bullet loan for refinancing and working capital. The deadline for commitments is July 22 and a bank meeting will be organised in Singapore on July 1. The debt is priced at a margin of 150bp over dollar Libor.

Top Stories PhosAgro closes debut PXF The company said it was considering raising the loan back in March, in order to fund expansion in target markets, after experiencing its best annual results since 2012.

PDO closes its debut PXF with $4bn blow-out deal PDO chose to upsize the facility to $4 billion

Hornsdale Wind Stage 2 financing closes with swap innovation The overall project is backed by two 20-year feed-in tariffs to sell power to the ACT, awarded to each stage of the project under the ACT Government’s reverse wind auction programme.

Sucden doubles its RCF to $400m The increase reflects a recent surge in sugar prices coupled with the expansion of the group into cocoa and coffee trading via acquisitions which include General Cocoa, Coffee America and Nedcoffee.

Saipem raises €554m ECA-backed credit The first tranche, around €200 million, may be drawn in the coming month for the partial repayment of a €1.6 billion bridge-to-bond credit signed on 10 December 2015.

Goshawk raises $345m for aircraft acquisitions The deal, signed on 28 June, comes with an accordion option for up to $750 million.

Aircastle raises $400m asset-based facility The deal includes an accordion option allowing for $67.5 million in additional future funding.

News in brief PACCAR inks $3bn loan The bookrunners for the truck manufacturer’s loan are BNP Paribas, Citi, JP Morgan, MUFG and US Bancorp.

Equate refinances with $5bn term loan The Kuwaiti petrochemical company signed the loan with a five-year tenor.

JP Morgan expanding trade finance footprint in India The bank’s existing Indian offerings - cash management, trade finance and foreign-currency payments - will also be offered through the new branches.

AIIB to expand membership and operations Countries have until September to apply to join the bank and applications are already pending from states

including Algeria, Chile, Colombia, Venezuela, Cyprus, Greece, Ireland, Libya, Nigeria, Senegal and Sudan.

Excelerate Energy inks new $1.1bn loan The US-headquartered firm signed the 18-month loan at a margin of 300bp above Libor.

ABC Group signs $75m RCF The Canadian motor parts company will use the facility for working capital. It has a maturity of four years and 11 months.

AfDB issues $350m trade finance facilities to Nigerian banks The project will help address critical market demand for trade finance and dollar liquidity by supporting sectors such as agri-business, chemicals, construction, engineering, food processing, manufacturing and non-traditional exports.

SEC raises $1.5bn unsecured facility from ICBC SEC’s latest fundraising follows a $900 million 13.25 year Kexim-covered loan closed in May.

US Ex-Im report laments uncertain future In the ECA’s global export credit competition report, it said that uncertainty over the bank has been particularly damaging to small exporters.

Iochpe-Maxion signs $275m loan The Brazilian firm was able to secure the dollar-denominated loan as most of its sales are made in dollars.

Oleoplan signs BRL100m PXF to fund exports The Brazilian firm will use the funding to finance exports of vegetable oil.

Moog refinances $1.1bn revolving credit facility The maturity of the credit facility has been extended to June 2021 from May 2019.

TSKB closes 367-day loan refinancing Proceeds will be on-lent as trade financing.

Solairedirect raises DFI loans for Los Loros solar project Los Loros is not backed by a power purchase agreement (PPA) and all the energy will be sold on the spot market.

Bancomext, GIZ and KfW team up on Mexican renewables investment Under the terms of the agreement Bancomext will work within the DKTI to provide support for financial institutions to fund solar power projects.

ADB to provide $12 million annually to Samoan banks The agreement marks the first time that banks from Pacific countries have participated in the TFP.

Canada Goose secures C$200m ABL facilty The Canadian exporter’s loan is secured by the firm’s inventories.

American Airlines follows up with EETC B notes American Airlines has priced a $227 million B tranche from its American Airlines 2016-2 enhanced equipment trust certificate (EETC).

Solway raising PXF deal for Fenix project Proceeds will fund working capital and a $30 million investment in the ramp-up of Solway’s Fenix low-cost nickel project in Guatemala.

Neelum Jhelum Hydro tops off funding with sukuk and Chexim loan The total project cost is estimated at Rs404 billion of which around 75% is being funded through debt.

Change of ownership will not affect Taiba N’diaye wind project The project is backed by a 20-year power purchase agreement with Senelec.

Sinosure to fund West Java Disneyland China Metallurgical Corporation (MCC) has the EPC contract for the project which is expected to be completed by 2018.

Russian mining group Mechel announces new CFO Rezontov replaces Andrey Slivchenko, who Mechel announced was leaving in May following the expiry of his two-year contract.

Usina Coruripe de Acucar e Alcool signs sugar cane export loan The Brazilian producer signed a six-year 11-month loan.

Goldcorp signs $3bn RCF The working capital is critical for Goldcorp as cash flow has fallen in the last year and is expected to continue to decline in line with falling gold production.

Traxys North America to sign $175m credit facility The loan will be used for its metals manufacturing operations.

Finnair closes €175m revolving credit facility The loan replaces a syndicated RCF dated July 2 2013, which was unutilised.

NordLB adds to aircraft syndication team Patrick joins from Santander where he was the head of aviation from June 2008.

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