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Case Study: Promigas Shifts Liability Management Strategy with US$200mn Loan

Colombia’s Promigas marked its first foray into the syndicated loan markets by securing a US$200mn 5-year unsecured facility, allowing the company to consolidate its existing debt at more aggressive pricing while broadening its funding base.

Feb 21, 2017 // 10:10AM

Deal At A Glance

Borrower: Promigas S.A. E.S.P. in Colombia and Gases del Pacifico S.A.C. in Peru.

Deal Type: Unsecured Syndicated Loan

Governing Law: State of New York

Lenders: Banco de Crédito del Perú, Banco de Crédito e Inversiones S.A., Bank of America, Bank of Nova Scotia, Banco Sabadell, Banco Santander, Bank of Tokyo – Mitsubishi UFJ, Citibank, Export Development Canada, ING Capital LLC, Intesa Sanpaolo S.p.A, JP Morgan, Mizuho Bank, Santander Colombia, Sumimoto Mitsui Banking Corporation

Administrative Agent: JP Morgan & Chase Bank

Legal Adviser to JLMs: Holland & Knight LLP, Rebaza, Alcázar & De Las Casas

Legal Advisers to Issuer: White & Case LLP, Phillipi, Pietrocarrizosa, Ferrero, DU & Uría

Size: US$200mn

Tenor: 5 years (2-year grace period)

Date of Issue: December 2016

Price: Confidential

Use of Proceeds: To finance gas infrastructure development and consolidate existing debt

 

Background

In the third quarter of 2016, Promigas, one of Colombia’s oldest natural gas infrastructure operators, sought funding to both carry out a liability management exercise and consolidate existing debt. The efforts coincide with its bid to finance the development of the country’s first regassification plant.

The company managed to close two transactions in late December, a US$200mn unsecured loan and a US$110mn project finance facility, which helped Promigas achieve its objectives of aggressive pricing and diversifying its funding base.

Transaction Breakdown

Promigas’ first foray into the syndicated loan market concluded with a US$200mn 5-year term loan provided by 14 local and international lenders including Banco de Crédito del Perú, Banco de Crédito e Inversiones S.A., Bank of America, Bank of Nova Scotia, Banco Sabadell, Banco Santander, Bank of Tokyo – Mitsubishi UFJ, Citibank, Export Development Canada, ING Capital LLC, Intesa Sanpaolo S.p.A, JP Morgan, Mizuho Bank, Santander Colombia, Sumimoto Mitsui Banking Corporation. The final loan agreement was signed on 23 December 2016.

This loan, which carries a 5-year tenor and a 2-year grace period, will be used to finance the infrastructure that will enable the transportation of greater volumes of gas from the Southern Atlantic Coast.

The loan syndication process involved meeting representatives from the various lenders in New York several weeks before closing the transaction. The US$200mn loan was oversubscribed 1.95x, which allowed the bank to secure more aggressive pricing on deal, and attract new global lenders that had no previous relationship with Promigas.

The syndicated loan also marked a deviation from the company’s existing liability management strategy, which tended to see the gas infrastructure operator lean on local banks and the capital markets when raising new debt.

The deal also coincided with the execution of a US$110mn project finance facility for Sociedad Portuaria el Cayao (SPEC), a subsidiary of Promigas, to help finance the first regasification plant in Colombia. The deal was financed by Davivienda and Corpbanca, and involved a corporate credit agreement with the two lenders, and an international leasing agreement with Davivienda Internacional. The facility carries a tenor of 9.5 years and includes one-year grace period.

The company managed to secure the project finance facility at a difficult time for the Colombian energy sector, which was challenged by adverse weather conditions caused by El Niño.

Americas Andes Latin America

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