TFR Deal of the Year 2004: IDM Equipment, USA

Feature

posted 23 Feb 2005 in Volume 8 Issue 4

IDM Equipment, USA: Co-ordinating ECA power

Lead arranger: JPMorgan Chase

Borrower: IDM Equipment, USA

Deal size: $27.5m

Financial advisors: JPMorgan Chase & EDC

ECAs: EDC and US Ex-Im

Terms: one year

This transaction involved the careful co-ordination of Export Development Canada (EDC), US Export-Import Bank (US Ex-Im) and JPMorgan Chase to finance a purchase of equipment by Algeria’s national energy company ENTP/Sonatrach from IDM Equipment (IDM), a Texas-based manufacturer of oil-drilling rigs, and Industrial Electric Rigs (IER), a Canadian company.

The financing was arranged after IDM entered into a joint venture with IER, which had the original purchase order from ENTP to re-power 12 drilling rigs in Algeria. In order to facilitate the $27.5m transaction with ENTP/Sonatrach, IDM and IER approached US Ex-Im, EDC and JPMorgan for assistance.

“We deployed knowledge of our long-time customer IDM Equipment and its counterparties; of its business and its markets; and of the export-finance programmes of EDC and US Ex-Im to make this transaction successful,” says Jackie Kaiko, head of global middle-market trade sales for JPMorgan. “Crucial to the deal were elements that accommodated the requirements of EDC and Ex-Im, allowing them to support the transaction and thereby mitigate risks for the seller, the buyer, the lenders and the guarantors.”

ENTP provided a 5% downpayment, and the remaining 10% was available upon shipment of goods paid against an LC issued by Banque Exterieure d’Algerie. The remaining 85% was financed by EDC under its medium-term financing programme. By manufacturing and shipping products in both countries, it ensured that the minimum 36% Canadian and 51% US content requirements were met for EDC and US Ex-Im respectively.

JPMorgan used the Ex-Im working-capital-guarantee programme (WCGP) to extend a $5.8m one-year line of credit specific to the ENTP project to IDM, with the guarantee from the IER/IDM joint venture in Alberta, Canada. EDC issued a comprehensive accounts-receivable insurance policy covering the political and commercial risk of ENTP, with the proceeds assigned to JPMorgan. The WCGP facility helped IDM meet its pre-export financing needs relative to this contract.