DLA Piper has advised a syndicate of banks consisting of ABN AMRO Bank N.V., Natixis and Société Générale on a US$195m prepayment facility for Xinjiang Zhaokun Trading Co. Ltd (“Zhaokun”), an aluminium producer in the Kashgar province of the People’s Republic of China (“PRC”), to finance the purchase and production of aluminium, and to refinance an existing prepayment facility provided by Zhaokun’s existing offtaker, Gerald Metals S.A.
The three-year senior secured loan marks the company’s offshore syndicated loan debut and has US$125 million in commitments ahead of the syndication of an accordion tranche of up to US$70 million.
The facility benefits from a complex security package containing typical commodity finance structures interlinked with onshore asset security. The facility also benefits from unsecured offshore corporate guarantees from members of Zhaokun’s group.
Certain members of the offtaker group are also participating as lenders in the facility and are providing a performance guarantee as well as a third party limited recourse guarantee which required some innovative structuring and drafting to balance the obligations of a guarantor against the rights of a participant in the syndicate and the inevitable effect on voting rights.
Jolyon Ellwood-Russell, partner at DLA Piper, said: “While the transaction was complex in its structure and documentation, commodity prepayment facilities into the PRC are very familiar to us in the DLA Piper Hong Kong Structured Trade and Receivables Finance team, so we were able to draw on our experienced team of structured trade lawyers and facilitate the smooth and timely completion of a difficult but innovative deal.”
The team was led by Jolyon Ellwood-Russell, Partner, with assistance from Senior Associate Catherine Arlin. Partner Zhang Xin of Global Law Office in Beijing advised on the PRC aspects of the transaction.
The deal was completed 31 July and syndication launched in September.
