HMC Polymers: Remortgaging

The first petrochemicals deal in Thailand in 2007 and the only Asian petrochemicals deal with international bank participation, the $475 million HMC Polymers project financing closed mid-year. The fully uncovered deal – no political risk cover and full petrochemicals market risk – reflected the confidence of lenders in the project and was key to the sponsor's expansion strategy.

HMC is owned by PTT, Basell and Thai shareholders and was established in 1987 as the first polypropylene manufacturing facility in Thailand. The financing backs construction of a third polyolefins line at HMC's exisiting 450,000 tonnes per year polypropylene plant at Map Ta Phut.

The new facilities include a 300,000 tonnes-per-year propane dehydrogenation plant with propane feedstock supplied by PTT to a LyondellBasell-licensed Spherizone polypropylene plant.

Once the new production plants are both operational in 2009, HMC Polymers will become the largest polypropylene producer in Thailand with a total aggregate polypropylene production capacity of 750,000 tonnes per year.

The project is not only key to HMC's expansion plans, but also a significant downstream diversification for PTT and therefore Thailand's energy plan.

Backed by a cashflow-generating existing asset that HMC contributes as equity in kind, along with cash equity on a debt-to-equity basis of 85/15, the deal both refinanced existing debt and provided the expansion funding.

The 10.5-year uncovered financing breaks down into a $210 million offshore piece, a $200 million Baht equivalent domestic bank tranche and a $65 million Baht equivalent working capital tranche.

Pricing was competitive, with the dollar debt coming in at 95bp over Libor and the domestic debt at 225bp over the fixed deposit rate.

Offshore arrangers that committed for a 25bp fee were KBC Bank (technical, environmental and market bank), SMBC and Standard Chartered Bank, each providing $45 million, HSBC (documentation, insurance and modelling bank) with $40 million and Calyon with $35 million.

Domestic arrangers were Bangkok Bank ($90 million), Krung Thai Bank ($55 million) Siam Commercial Bank ($35 million) and Government Savings Bank ($20 million) – also for a fee of 25bp.

HMC Polymers Company Ltd
Status: Closed 6 July 2007
Description: Polypropylene project expansion
Sponsors: PTT 41%, Basell 29%, Thai shareholders 30%
Mandated lead arrangers $ tranche: Calyon, HSBC, KBC, SMBC, Standard Chartered
Mandated lead arrangers THB tranche: Bangkok Bank, Krung Thai Bank, Siam Commercial Bank, Government Savings Bank
Legal counsel to sponsor: Baker & McKenzie
Legal counsel to lenders: Linklaters
EPC contractors: CTCI Overseas Corp, Stone & Webster