| Senoko Power - senior and mezzanine debt financing | S$2.65bn | |
|---|---|---|
| Financing comprising S$2.2bn 5-year senior term facility, a S$150m 5-year senior working capital facility and a US$220m (approx S$300m) 8.5-year mezzanine facility | ||
| Firm | Client | Role |
| Latham & Watkins | Senoko Power | International counsel |
| Rajah & Tann | Senoko Power | Singapore counsel |
| Allen & Overy | The Bank of Tokyo-Mitsubishi UFJ, DBS Bank, Oversea-Chinese Banking Corporation, Sumitomo Mitsui Banking Corporation, Calyon, Mizuho Corporate Bank Natixis, Société Générale, BNP Paribas, Fortis Bank SA/NV, ING Bank N.V., ANZ, KBC Bank NV, The Royal Bank of Scotland, National Australia Bank and The Sumitomo Trust & Banking Co. (Lenders) |
International counsel |
| TSMP Law | Lenders | Singapore counsel |
| Clifford Chance | Development Bank of Japan | International counsel |
If Joseph Bevash of Latham & Watkins is to be believed, the complexity and multi-currency nature of his recent Senoko Power finance deal could become more commonplace in the future.
The financing was made up of a complex structure of senior term debt, mezzanine debt and multi-currency loans which also led to the requirement for swap contracts.
“Traditionally, swaps in project financings were interest rate swaps only – swapping variable rate interest for fixed rate interest. Currency swaps were relatively unusual because developers typically borrowed money in the same currency as their revenues,” said Bevash, office managing partner at Latham & Watkins’ Hong Kong office.
Borrowers are entering into currency swaps to balance the risks that they might otherwise have had from earning money in one currency and having to pay debt service in another. “The currency swap business has always been there, but it has never been tapped to this extent in major project finance deals, and I see this as a relatively significant emerging trend in connection with the diversification away from the US dollar and the increasing prominence of multi-currency borrowing facilities,” said Bevash.
Incorporating the swap contracts into the deal required complicated intercreditor arrangements to accommodate the needs of both debt and hedging counterparties. “The level of complexity keeps increasing, and also the sheer size – with major projects commonly arranging raising multi-billion dollar aggregate debt facilities. As a result, everyone is encountering matters of first impression that require novel thinking and novel solutions,” Bevash said. Latham & Watkins drew on the expertise of their lawyers from Singapore, Hong Kong, New York and London to complete the deal.
The firm also represented the shareholders in their acquisition of Senoko Power for S$3.65bn and the related financing for the transaction in 2008.
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