Banks have signed a $1.3 billion project financing for Russia’s RusVinyl PVC plant, which is being partly financed by European export credit agencies. The project, which will build Europe’s largest integrated polyvinyl chloride (PVC) plant, is a 50/50 joint venture between Russian petrochemical company SIBUR and venture partner SolVin, part of the Belgian Solvay group.
The dual-currency deal is split between four different tranches under a single financing document.
BNP Paribas, HSBC and ING have signed two ECA-support tranches which total Eu450 million ($633.6 million). The two tranches are split between a Eu350 million tranche backed by Coface, and a Eu100 million covered by Belgium’s ONDD. The ECAs will cover 95% of the political risk and 85% of the commercial risk coverage.
The European Bank for Reconstruction and Development (EBRD) and Sberbank are each providing a RUB6 billion (Eu150 million) 11-year loan. It is believed all the facilities will have a three-year grace period.
The remaining 40% of the $1.3 billion project is being funded through equity.
The deal is amortises on a semi-annual basis. Unusually for both a Russian project financing or for an international chemical project financing the deal does not have an off-take contract. While most Russian project financings are focused on export markets RusVinyl is aimed at the Russian domestic market with banks having to take the market risk.
Owing to the absence of an off-take contract the project sponsors have agreed to offer a post-completion Eu125 million contingent obligation, or liquidity support undertaken (LSU), to counteract any possible downgrades in the Russian market. Sponsors have been clear to distinguish that the LSU is neither a guarantee nor a suretyship but simply an obligation to place more liquidity in the project depending on pre-agreed thresholds. Pre-completion the deal is fully covered by sponsor guarantees. Following completion it becomes non-recourse.
BNP Paribas is the ECA–coordinating bank,inter-credit agent, security agent, and Coface agent, while HSBC is the MLA and insurance bank, as well as financial advisor to the sponsors. ING is the documentation bank, and technical and environmental bank, as well as the ONDD bank.
The deal was originally conceived in 2008 before the crisis with a different set of banks but a new club was formed in 2010. Speaking to Trade Finance Magazine sponsors indicated that the agreement between SIBUR and SolVin stipulated the plant needed to be financed through a limited, or non-recourse project-financing. The sponsors worked closely with the EBRD to create a 52 page initial term–sheet that was then presented to the other lenders which formed the template document for the final agreement.
Under a carve-out on the deal banks will only be able to sell down the project finance risk with the consent of the borrower in a “managed process”.
The deal sponsors describe the deal as a template for how future Russian project-financings may be done. With sponsors commenting that Russian banks are increasingly well-positioned to offer direct financings for these key projects.
Linklaters is providing legal counsel for the lenders with White and Case advising the sponsors.
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