Despite the bank market being at the height of its illiquidity in November last year, PTT Asahi Chemical Co (PTTAC) – a joint venture between PTT (48.5%), Asahi Kasei (48.5%) and Marubeni (3%) – closed $400 million in project debt for its $786 million Rayong polypropylene project in Thailand. The deal was the first major project financing into Thailand since the start of the credit crunch.

In addition to the liquidity issues, PTTAC also had to sell the technology to lenders – the plant will be the first in the world to produce acrylonitrile (AN) and methyl methacrylate (MMA) from propane feedstock and is the first commercial use of proprietary propane based AN technology developed by Asahi.

The project was also not without legal hurdles – according to lender legal counsel Baker & McKenzie, most of the lenders' standard project finance protections were unclear or had been given away during the term sheet stage and had to be clawed back.

The plant should have a competitive advantage in the global petrochemicals market. The use of propane rather than propylene feedstock is expected to lower production costs and both AN and MMA are key raw materials in the production of a range of white goods and acrylic fibres.

Feedstock will be largely sourced from PTT and the plant will produce 200,000 tonnes-per-year (tpy) of AN and 70,000 tpy of MMA. CTCI is EPC contractor and commissioning is slated for the fourth quarter, 2010.

The financing was lead arranged by BTMU (also facility agent), HSBC, SMBC, Mizuho, Sumitomo Trust, Norinchukin Bank and ING Bank – Bangkok Bank was originally part of the club but withdrew because of issues over providing loans in dollars.

The facility comprised $400 million of 12-year debt (including a three-year grace period) with competitive pricing at 125bp over Libor, rising to 200bp. Participation and commitment fees were 125bp and 25bp respectively.

PTT Asahi Chemicals

Status: Signed 26 November 2008
Sponsors: PTT Public Company Limited, Asahi Kasei Chemicals Corporation, Marubeni Corporation.
Lead arrangers: HSBC, Norinchukin Bank, Sumitomo Trust & Banking, ING, SMBC, BTMU, Mizuho
Financial adviser: Calyon
Borrower legal counsel: Hunton & Williams,
Lender legal counsel: Allen & Overy, Baker & McKenzie
Consultants: Nexant (market, technical and environmental)