Sanmar secures $868-m loan for Egypt project

Chennai: Chennai-based diversified Sanmar group has successfully completed the financial closure of a $868 million loan to fund its Egypt plant, TCI Sanmar Chemicals LLC (TCI). The transaction is the first substantial international project loan which is wholly financed by Indian banks.

Sanmar group, which bought TCI in early 2007 for a consideration of $275 million (funded through ICICI Bank), has been struggling to raise funds to make it operational with higher capacity.

“This is a landmark financing transaction, and comes at a time when the world is going through a difficult situation,” said N Sankar, chairman, Sanmar group. TCI Sanmar will go on stream in early 2010, he added.

The syndicate which financed the loan is a who's who of leading Indian banks, including State Bank of India, Bank of India, ICICI Bank, Indian Overseas Bank, Axis Bank, Export-Import Bank of India, Bank of Baroda, Indian Bank, Syndicate Bank and Union Bank of India. SBI's Bahrain branch was the facility agent, offshore account bank and offshore security agent, the company said on Tuesday.

These banks together provided a long-term loan facility of $565 million. Arab African International Bank provided another $70 million working capital facility; it acts as the onshore security agent and onshore account bank.

“The banks' support reflects our inherent strength and their confidence in Indian business in general and the Sanmar group in particular. The group has been enjoying good long-term relationships with most of these banks for over decades,” Sankar said. TCI Sanmar, which has production facilities at Port Said, will be Egypt's largest chloralkali plant with a VCM (vinyl chloride monomer) capacity of 400,000 tonne per annum. Half of this will be converted into downstream PVC for sale in the local and regional markets. The caustic soda production capacity will also be increased to 275,000 tonne per annum.

The company, which is in the process of implementing massive capacity addition, is expected to become one of the top 10-15 PVC manufacturers in the world with a combined capacity of around 460,000 tonne per annum, including a 2,00,000 tonne greenfield PVC plant at Cuddalore. Half of the TCI's VCM production will be utilised for its upcoming Rs 600-crore Cuddalore PVC project.

Since the power cost in Egypt is competitively low, TCI will be the low-cost producer of the group, which will help it on a long-term basis. The company had earlier planned to invest close to Rs 4,000 crore in its chemical business. It seeks to have a turnover of Rs 5,500 crore by 2010.

Deal details

• First substantial international project loan wholly financed by Indian banks
• Arab African International Bank provided $70 million working capital
• Sanmar group bought TCI in early 2007 for a consideration of $275 million
• This was funded by ICICI Bank