Platform Stands Up to Banks

Banks and sponsors are locked in a tough negotiation over pricing on an $850m 10-year Brazil project loan for a set of twin drilling platforms to be used by Petrobras. Odebrecht, the project’s sponsor, and international bank lenders, appear to have irreconcilable differences on where the facility – the largest and longest tenor currently in the market – should price. There is some agreement that the current Libor plus 300bp-375bp pricing is insufficient. But banks, especially smaller institutions with lesser balance sheets, insist the starting point should be no lower than 350bp for consideration by credit committees. Odebrecht officials meanwhile say there is no way it will pay more than 325bp in the first year, and that a 25bp pickup should be sufficient to bring in lenders requiring additional spread. “The pricing is a bit thin,” says a project syndicator at a major LatAm lender. “It has to start at at least 350bp,” says a prospective participant at a smaller shop. The deal’s commitment period has been pushed back by a week to May 22, but it will likely need even more time. The main problem for Odebrecht is that there are other projects in the region – some in higher rated countries – offering higher spreads for shorter tenor and lower volume. AES Campiche, for example, cut tenor to 7 from 10 years and lowered size to $220m from $445m and is still seeking lenders for a Chilean deal that pays 350bp-400bp over Libor. Pacific Rubiales – an oil and gas firm with assets in Colombia – is still patiently waiting for additional participation on a 4-year $250m facility paying 550bp. Both have been marketing for more than 2 months and bankers say that liquidity continues to be constrained.