denotes premium content | Jan 6 2009 
Feature
posted 23 Feb 2005 in Volume 8 Issue 4
Sonangol, Angola: Sonangol raises the bar for African trade finance
MLAs & underwriters: Deutsche Bank, Standard Chartered, Calyon, Barclays, Commerzbank, Royal Bank of Scotland, KBC, Natexis Banques Populaires, Banco Espirito Santo
Deal size: $2.35bn
Borrower: Esperanca Finance Limited (Sonangol), Angola
Tenor: up to six years
Sonangol is a well respected name within the trade-finance community – and an oft-mentioned transaction when Deals of the Year are nominated. Yet on 23 August 2004, the Angolan oil producer signed a deal that, even by its own standards, was something special.
The deal is remarkable for both its size and tenor. At $2.35bn – increased from a syndication target of $2.25bn – the facility is the largest oil-backed transaction in the entire history of the structured-trade-finance market. Indeed, the transaction more than doubles the deal size of Sonangol’s record 2003 deal. Furthermore, the six-year repayment schedule is the longest African trade-finance facility ever achieved. In a region where many bankers become jittery with terms less than a year, Sonangol’s deal is a mark of the reputation that the company has earned among trade financiers.
“When we first discussed the potential size of the transaction with Sonangol, we were very excited,” says John Goodridge, director in Standard Chartered Bank’s structured trade finance team. “We were always confident that, given the excellent reputation and track record of Sonangol, the deal would be successful. Indeed, this is demonstrated by the first-class bank group that was put together.”
Barclays Bank, Banco Espirito Santo, Calyon, Commerzbank, Deutsche Bank, KBC, Natexis Banques Populaires, Royal Bank of Scotland and Standard Chartered acted as mandated lead arrangers on the facility. Deutsche, Barclays and Calyon were hedge providers and Standard Chartered was co-ordinating bank.
Yet despite the number of MLAs, and the fact transactions with Sonangol are typically popular with trade financiers, there were concerns that the sheer size of this facility would challenge the syndication prowess of the lead arrangers – especially with the credit committees of participating banks typically having little enthusiasm for taking large amounts of exposure in Sub-Saharan Africa.
Any worries proved unfounded, however, as the Sonangol facility came in oversubscribed.
“Just because it is Sonangol, does not make it a slam dunk for lenders,” says Kris Van Broekhoven, vice president of Deutsche Bank’s global-trade-finance team.
“For many regular lenders to Sonangol, the facility sticks out as the only non-South African Sub-Saharan deal on their books. So to push the tenor to six years, and greatly increase the facility’s size, is quite an achievement.”
Sonangol has a track record of almost two decades in structured trade financings, yet this deal marks a significant evolution in the financing available to the state-owned Angolan oil company that goes beyond simply rewriting the record books in terms of size and tenor. The hedging requirements of the facility have been designed to give Sonangol more flexibility in its oil-trading operation – particularly when compared to previous deals.
Says Goodridge: “The main structural innovation for the deal was that Standard Chartered, which also acted as sole hedge arranger, introduced a new hedging transaction methodology that generated real value to the client.”
Also, pricing, identification of purchasers, sales and prepayment terms are all managed by Sonangol – subjecting the borrower to far fewer lending restrictions than would have been demanded previously, while still allowing lenders to take confidence in the integrity of the structure.
