denotes premium content | Jan 6 2009 
Feature
posted 23 Feb 2005 in Volume 8 Issue 4
Reliance Industries, India: Deutsche Bank open Indian ECA market
Mandated arranger: Deutsche Bank
Borrower: Reliance Industries, India
Deal size: €116.2m
ECAs: Euler Hermes & Sace
Tenor: 10.5 years & 9 years
Indian petrochemical giant Reliance Industries has not signed an export credit agency-backed transaction in 22 years – making the Deutsche Bank arranged u116.2m ($151.5m) export-finance facility signed for the company in December a significant event.
“ECA deals have been quite thin on the ground in India because the primary names have ready access to cheaper sources of domestic finance,” says Paul Hare, managing director of global trade finance at Deutsche Bank in Singapore. “However, in this case Reliance was keen to expand both its sources of financing and the financial products it could utilise. And certainly the profile of this deal suited that ambition.”
The facility, financing a major expansion project, splits into two buyer credit financings – covering German and Italian exports. A €103.5m, 10.5 year facility covered by German ECA Euler Hermes supported exports from Barmag, Zweigneiderlassung der Saurer & Co. KG, Remscheid and Zimmer. The supply contracts represent among the largest contracts ever won for both companies. Meanwhile, a €12.7m, nine-year facility covered by Italian ECA Sace supported supply contracts from Salmoiraghi, Monza. Deutsche Bank acted as sole lead arranger on both tranches.
Proceeds of the loan will be used to finance the import of equipment for the expansion of Reliance’s polyester plants in Hazira and Patalganga in Maharashtra, India.
“Reliance’s excellent rating and the outstanding co-operation between the German government, Euler Hermes and Reliance enabled Deutsche Bank to reduce the turnaround time from being awarded the mandate to receiving ECA coverage to only four weeks,” says Udo Bergholz, director of global trade finance at Deutsche Bank in Frankfurt.
“The facility also demonstrates Deutsche Bank’s strong multi-sourcing capabilities.”
Indeed, Deutsche Bank’s name against a Sace-covered transaction is the first for two years – reflecting the fact the bank established a dedicated Milan-based ECA finance team two years ago.
“Italian export finance is once again a core market for Deutsche Bank,” says Bergholz.
The deal enables Mumbai-based Reliance Industries to finance planned business growth using the longer-term funding available from ECA-covered financing. It also adds a new and competitively-priced source of financing for the company, which is significant in light of the aggressive expansion plans for both Reliance Industries and the other entities of the Reliance Group – India’s largest business house with total revenues of Rs 99,000 crore ($22.6bn).
“On an all-in basis we were ever so slightly more expensive than the local market,” says Hare. “However, the deal made sense from a diversification point of view and we expect other primary Indian names to also come forward and tap the latent potential of ECA-financings for India.”
Reliance Group is focused on the power, oil and gas, and telecoms sectors, exporting to more than 100 countries.
