In a major cross-border financing for one of the biggest oil and gas projects in South Asia, law firm Milbank, Tweed, Hadley & McCloy LLP has represented Germany’s state-owned development bank KfW IPEX Bank GmbH as lead arranger in a $US 2 billion financing for expansion of several petrochemical projects in India operated by Reliance Industries Limited (RIL).
The financing, which closed on 7 May, was covered by the German export credit agency Euler Hermes Deutschland AG.
The deal is noteworthy on several fronts. Besides being the largest underwriting ever by Euler Hermes, the US$2 billion represents the biggest financing ever for KfW, which is jointly owned by the Federal Republic of Germany (80%) and the States of Germany (20%). The loan, which has a 13-year maturity, will help diversify Reliance Industries’ funding sources and significantly extends the maturity profile of its long-term debt. Reliance is expected to primarily use the loan to finance purchase of goods and services from some 40 German suppliers in expanding its petrochemical facilities in the Indian cities of Jamnagar, Hazira, Silvassa and Dahej.
Euler Hermes for the first time accorded to RIL a “Better than Sovereign” rating. The deal was very well received by institutional buyers, drawing a 50% oversubscription.
KfW IPEX-Bank GmbH arranged the Euler Hermes cover, while the following nine banks participated in funding the facility: KfW, Citibank N.A.; Commerzbank AG; Nord LB, Banco Santander, S.A., Landesbank Baden-Württemberg, DZ BANK AG, BHF-BANK AG and ING Bank.
Milbank’s financing team was led by London-based project finance partner John Dewar, along with finance Of Counsel Anthony Morton in Frankfurt.
“Although this type of financing is not by itself new, it represented several important milestones and innovations, including Euler Hermes’ flexibility and approach to the loan, along with its ‘better-than-sovereign’ rating accorded to a corporate issuer, as well as the approach to future supply, and the sheer size and speed of documentation and execution,” Anthony Morton explained. “German banks and Euler Hermes have demonstrated to purchasers and suppliers of large-scale petrochemical equipment they can deliver large-scale financing quickly.”
John Dewar added “This is a landmark transaction which will have a positive impact on both the Indian and German economy creating value and jobs. The transaction has also showcased Milbank’s expertise in German and English law governed export credit and project finance.”
Glenn Gerstell, Milbank’s India practice group leader commented, “We are pleased to have helped structure such a high-profile financing bridging key European funding sources with one of the preeminent industrial companies in South Asia. The deal demonstrates the significant depth of our market leading India financing practice.”
Reliance Industries Limited is India's largest private sector company, with a turnover of INR 339,792 crore (US$ 66.8 billion), cash profit of INR 31,994 crore (US$ 6.3 billion) and net profit of INR 20,040 crore (US$ 3.9 billion) as of March 31,2012. RIL is the first Indian company to be ranked among the Fortune Global 500 list and ranks 119th amongst the world's Top 200 companies in terms of profits. RIL ranks 68th in the Financial Times Global 500.
About Milbank
Milbank, Tweed, Hadley & McCloy LLP is a leading international law firm which has been providing innovative legal solutions to clients throughout the world for nearly 150 years. Milbank is headquartered in New York and has offices in Beijing, Frankfurt, Hong Kong, London, Los Angeles, Munich, São Paulo, Singapore, Tokyo and Washington, DC.
The firm has more than 650 lawyers who provide a full range of legal services to the world’s leading commercial, financial and industrial enterprises, as well as to institutions, individuals and governments.
Milbank’s lawyers meet the needs of our clients by offering a highly integrated and collaborative range of services across key practice groups throughout our global network. Milbank’s integrated practice is underpinned by our attorneys’ acknowledged technical excellence, sector expertise and a strong tradition of innovation and client service.
