Swiss commodities trading firm Mercuria is testing lenders' appetite for a $1 billion syndicated loan facility, at a time when it is embroiled in a lawsuit with Citi over payments for metal-backed financing in the Qingdao Port.
The privately owned trading firm, which recently bought JP Morgan's physical commodities business, has become a regular visitor to syndicated loan markets in the region and concluded roadshows to lenders in Shanghai, Dubai, Taipei and Singapore some two weeks ago. It is now waiting for commitments to come in.
Even as it taps lenders, Mercuria is embroiled in a lawsuit with Citi, with the US bank seeking early settlement of about $270 million in relation to a repurchase transaction in Qingdao Port. According to past news reports, Mercuria has countered saying that saying that there isn't enough information to demand an early repayment as the port is in shutdown.
Banks and companies are seeking to limit their exposure in Qingdao Port, where officials are investigating whether companies controlled by Singapore national Chen Jihong pledged collateral multiple times to secure loans. A number of banks including ABN Amro, Standard Chartered, HSBC and Citi have exposure to the Qingdao Port.
At the moment, the ongoing lawsuit hasn't fazed lenders, according to one Hong Kong senior loan banker. "We are looking at the loan," he said. When asked if the fact that Mercuria was in a lawsuit with Citi was an issue, he said "No, that's not an issue, that's Citi's problem," he added.
In June, Mercuria signed a $2.65 billlion facility following strong demand from the market.
Its latest syndicated loan comprises $300 million and $200 million one-year revolving facilities, offering a margin of Libor plus 120bp. The smaller facility allows Mercuria to draw down a loan on shorter notice than usual. The third facility is a $500 million three-year revolver, which offers a margin of Libor plus 175bp.
The mandated lead arrangers and bookrunners are ANZ, Bank of Tokyo Mitsubishi, DBS, Emirates NBD, First Gulf Bank, ICBC, ING, RBS, Societe Generale and SMBC. HSBC, Mizuho and Standard Chartered have committed smaller amounts and are mandated lead arrangers. Commitments for the loan are due on October 24.