Deals of the year – commodity deals 2005

Putting Kazakh uranium on the map

Kazatomprom – pre-export financing

Coordinating MLA: Natexis Banques Populaires

MLA: Citigroup

Borrower: Kazatomprom, National Atomic Company

Amount: $150 million

Tenor: 3 years

Margin (over Libor/euribor): 1.95% p.a.

Legal counsel: Denton Wilde Sapte

Uranium contracts had never been used as security for a syndicated bank loan until Kazakh state-owned National Atomic Company Kazatomprom launched an unprecedented pre-export financing facility in June 2005.

“This deal took us into un-chartered territory”, says Mathieu Postel, head of structured finance in the natural resources and related industries department at mandated lead arranger Natexis Banques Populaires in Paris. “Despite extensive experience in the region and with a wide variety of natural resources there was nothing to teach us how to structure a deal involving such a commodity”.

Even so, with Natexis at the rudder acting as mandated lead arranger as well as bookrunner, and facility and security agent – and with Citigroup as mandated lead arranger and bookrunner – the syndicate was massively oversubscribed. And, more astonishingly, Kazatomprom, who are newcomers to the syndicated loan market, won an oversubscription of nearly double the loan-amount requested, although they elected to not increase  the original target amount of $150 million.

The loan carries pricing of 195 basic points over Libor, repayable in four bullet repayments over a three-year period. Several offtakers are tied into the security package, signed to long-term contracts with Kazatomprom, which have prices fixed to a mechanism that adjust with changes in the spot-price of uranium.

A one-pound weight of the material currently carries a market value of $36, compared to just $10 in 2004. And with global energy needs diversifying, the uranium industry is attracting investors. Indeed, this positive outlook encouraged Kazatomprom to approach the syndicated loan market specifically in order to raise its international profile.

“Part of the intention of this deal was to put Kazatomprom on the international map,” says Natexis’s Postel. “And it has certainly achieved that.”

Kazatomprom will use the funds to finance the production and exploration of natural uranium concentrate, and to support the exploration activities of the deal’s guarantor, LLP Mining Company.

“The  success of the syndication represents a boost to both Kazakhstan and Kazatomprom’s plans for development,” says Postel. “Similar trade finance deals may well follow since the country is so asset rich in uranium.”

Arrangers on the deal are Calyon, Crédit Suisse, DZ Bank, Mizuho Corporate BankNederland и Société Générale.Co-arrangers are BCV, DekaBank Deutsche Girozentrale, Erste Bank der Oesterreichischen Sparkassen AG and Rothsсhild.

Trade Finance