The past year, as we are all well aware, has been a relatively barren period for project financing.

This is particularly true of the Oil & Gas sector, where the collapse of oil and gas prices in the latter half of 2008 forced cash-strapped, risk-averse banks to rein in their commitments to projects: the total value of deals closed in the sector in the first half of 2009 fell by 77 per cent to US$9.7 billion, down from US$43.36 billion in the second half of 2008.

So any project managing to close not one but two debt financing packages during this period is worth a closer look.

One sponsor that has achieved such a feat is Petroterminal de Panamá (PTP), with two financings of its oil storage facilities.

At the end of September HSBC, on behalf of PTP, closed a US$480 million facility comprising US$105 million in equity and US$375 million in debt from a club of commercial banks.

The funds raised by this financing are being used not only to increase PTP's oil storage capacity, but also to refinance a debt package for the project closed just ten months earlier.

The first Panama oil storage financing

Sponsor PTP is a 30-year old midstream operating company, 50 per cent owned by the Government of Panama. NIC Holding holds a 33.17 per cent share in the company and Castor Petroleum holds the remaining 16.83 per cent.

PTP's primary assets consist of two deepwater crude terminals with an existing 5.7 million barrels of crude storage capacity and a 131-kilometer Transisthmian crude pipeline in Panama.

In November 2008, two months after the collapse of Lehman Brothers, PTP closed a US$225.6 million financing for the expansion of its storage facilities.

Comprising US$50.6 million in equity and US$175 million in debt, the facility financed construction of five crude oil storage tanks with a total capacity of 3.5 million barrels, located at both PTP's Atlantic and Pacific Terminals: two 659,809 barrels storage tanks on the Atlantic side and three 722,024 barrels storage tanks on the Pacific side [Projects Database].

In addition, the financing also funded the reversal of flow direction of PTP's existing pipeline to an Atlantic-to-Pacific flow configuration, in order to expand capacity to transport crude oil across the Isthmus of Panama, currently constrained by limitations on the ability of the Panama Canal to accommodate some of the new generation of super tankers.

Equity came from PTP's shareholders, while debt was provided by four MLAs:

• HSBC - US$91.5 million
• Banco Nacional de Panama (senior arranger) - US$25 million
• Banesco Banco Universal - US$10 million
• Towerbank International - US$10 million

A further US$28.5 million was provided by the following participant banks:

• Multibank - US$7.5 million
• Produbank - US$6 million
• Banco Panama - US$5 million
• Global Bank - US$5 million
• Metrobank - US$5 million

The remaining US$10 million came from Costa Rica-based multilateral Corporacion Interamericana para el Financiamiento de Infraestructura.

Priced at LIBOR plus 425bp, the debt had a tenor of eight years, with drawdown taking place on December 18 2008.

Bigger and better

While the above financing was being arranged during 2008, PTP was also in negotiations with BP over potential offtake of its storage and pipeline capacity.

These talks came to a conclusion in May 2008 with BP agreeing to acquire 5 million barrels of storage from PTP and to ship 65,000 barrels per day of crude oil on the pipeline for seven years once the pipeline reversal was completed.

BP's storage requirements upon completion of the pipeline reversal required significant extra capacity on top of what PTP was building for its other offtaker, Castor Petroleum, funded by last year's US$225.6 million financing.

To that end, in September this year a club of banks led by HSBC closed a US$375 million debt package for the project.

This transaction both refinanced the 2008 US$175 million debt and funded the development and construction of an additional 10 crude oil storage tanks [Projects Database].

The total value of the new deal is US$480 million with PTP providing US$105 million in equity at a debt to equity ratio of 78:22.

Like the original deal, debt is priced at 425bp over the Libor three-month rate, with a Libor floor of 250bp to guarantee a minimum all-in price of 675bp.

Tenor has an official duration of just over eight years at construction plus 27 quarters, but there is a cash sweep after 21 quarters, placing actual tenor at a little over five years.

A club of 17 banks were led by MLA HSBC and its joint bookrunner and lead arranger BNP Paribas. The lenders in order of ticket size are:

• HSBC - US$55 million
• Banco Nacional - US$55 million
• BNP Paribas - US$50 million
• Banco General - US$50 million
• EDC - US$40 million
• Scotiabank - US$20 million
• Caja de Ahorros - US$20 million
• BANESCO - US$17 million
• Bancolombia - US$10 million
• Global Bank - US$10 million
• CIFI - US$10 million
• Towerbank - US$10 million
• Metrobank - US$7 million
• BAC - US$6 million
• Produbank - US$6 million
• Banco Panama - US$5 million
• Multibank - US$4 million

The debt package reached financial closed on Tuesday 29 September.

Baker Botts was legal adviser to the US-based banks, while Morgan & Morgan advised local lenders in Panama. Fulbright & Jaworski and Galindo, Arias y López were advisers to the sponsor.

Construction of the storage tanks is expected to finish in March 2010. EPC contractors are Chicago Bridge & Iron, Constructora Urbana, Hayward Baker, Celmec, and U.N.I. Engineering.

The project at a glance