Directory of Innovative Financing: Venezuela

Venezuela

Project Title: Accrogas Liquified Natural Gas Project

Country: Venezuela

Project Costs: $550 million

Sector: Oil and gas

Status: Closed July, 1993

Sponsors/Adviser: Corpoven, SA, a wholly-owned subsidiary of the Venezuelan state oil company PDVSA, advised by CS First Boston with Banque Paribas as agent for the bank syndication.

Customers: Dow Hydrocarbons and Enron Liquid.

Financing Package: Corpoven's parent PDVSA invested $70 million in equity, but provided no guarantee for the remaining 87% of the costs that were to be raised on a project finance basis.

Considerable support came from export credit agencies such as COFACE of France ($90 million) SACE of Italy ($40 million) and US EXIM ($65 million securitized medium-term note program). Banks and insurance companies supplied the remaining $275 million by purchasing two tranches of secured export notes: Series A) $150 million in 6-year floating rate notes with a 3.5 year average life priced at 225 bp over LIBOR were bought by a syndicate of 12 international banks led by the New York branch of Banque Paribas; Series B) $125 million in 6.5-year fixed rate notes with a 4.8 year average life priced at 250 bp over Treasuries was privately placed with five US insurance companies led by affiliates of CIGNA.

Innovation: This deal is considered one of the largest project financings in Latin America since the 1980s debt crisis and according to Corpoven management required using "nearly all sources of funding available."

Through this dual appeal to banks and insurance companies, CSFB was able to achieve the first US private placement financing for a Venezuelan corporation, thus enabling Corpoven to broaden its funding base considerably. The strength of the sponsor's hard currency export contracts with the Dow and Enron subsidiaries also allowed the project to receive investment grade ratings from Moody's (Baa2) and Fitch (BBB), even though Corpoven itself was unrated and the Venezuelan sovereign rating was below investment grade.

The transaction has paved the way for other companies in developing countries to tap into new sources for funds, and has made it easier for other PDVSA subsidiaries to enter the markets.

Brief: Accrogas is a LNG complex in eastern Venezuela producing 650 million tons per year of propane under advance payment agreements with the two US clients. The secured export notes were secured by a pledge of future receivables to be generated under term sales contracts with Dow and Enron. Proceeds of the sales went directly to an offshore Accrogas special export proceeds collection account that maintained a specified debt service reserve. The notes were oversubscribed despite the year's political uncertainty in Venezuela.

Infrastructure and Financial Markets Division
Private Enterprise and Financial Markets Subdepartment
Sustainable Development Department
Inter-American Development Bank

Last updated: 02/26/07