RIL borrows $550 mn from Japanese banks

Loan to part-finance proposed expansion of petrochemical plants

Reliance Industries Ltd (RIL) has tied up export credit agency (ECA) facility of up to $550 million from Japan Bank for International Cooperation (JBIC) and a group of other Japanese banks backed by Nippon Export and Investment Insurance (NEXI). The funds are aimed at part-financing the proposed expansion of RIL’s petrochemical plants and setting up a new gasification plant and a refinery off-gas cracker through the next two-three years. In a statement, RIL said this was its eighth ECA facility for the company’s largest capital expenditure programme.This is the first time JBIC is extending credit to RIL. The bank will provide direct financing of up to $330 million.

The other banks participating in the ECA are Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation and Mizuho Bank, along with three regional Japanese banks — Gunma Bank, Hachijuni Bank and Chiba Bank. Together, these banks will provide up to $220 million and will be supported by a 95 per cent NEXI insurance cover, will finance up to $220 million.

The ECA facility will have a tenure of 12 years and will be used to finance contracts for imports of goods and services signed with about 20 Japanese suppliers, including small and medium enterprises.

With this facility, NEXI has introduced a new insurance programme that extends support to Japanese regional banks for financing such foreign projects. In addition to the six Japanese banks mentioned earlier, more are expected to participate, through a partial assignment of the contractual rights and obligations of the NEXI-covered portion.

RIL said the deal was significant, as JBIC was financing a buyer’s credit facility with more than 20 Japanese suppliers and the NEXI cover was not only provided for regional Japanese banks participating as primary lenders, but also for regional Japanese banks that would be part of the deal through syndication.

THE LENDERS

* RIL’s eighth Export Credit Agency facility co-financed by Japan Bank for International Cooperation (JBIC)

* Other participating banks are The Bank of Tokyo-Mitsubishi, Sumitomo Mitsui Banking Corporation, Mizuho Bank, The Gunma Bank, The Hachijuni Bank and The Chiba Bank

* JBIC extending credit to RIL for the first time