On 30 December bookrunners DBS, Maybank and Standard Chartered closed general syndication on the S$1.15 billion ($897 million) Universal Terminal refinancing. Interest in the credit was high, meaning that the eight banks that joined the deal had their allocations scaled back, after they provided commitments towards the top of the ticket size bands on offer.

The three original mandated lead arrangers had underwritten the single S$1.15 billion term loan facility earlier in 2013. The borrower is Universal Group Holdings, a holding company wholly owned by the Hin Leong Group, and which has a 65% stake in the Universal Terminal project. PetroChina owns the remaining 35%. Hin Leong is a Singapore-based conglomerate, owned by Lim Oon Kuin, which has interests in oil trading, bunkering, lubricants and diesel retailing, among other energy businesses.

Hin Leong raised the loan to repay an S$800 million facility from 2010 that was nearing maturity, and to free up capital for general corporate purposes. The health of Singapore’s oil storage market meant that the value of the asset had increased relative to the outstanding loan. The sponsor took advantage of this improved loan to value by increasing the size of the facility.

Since Hin Leong only owns 65% of the terminal, it could not offer the assets up as security, only its equity stake. Lenders have to get comfortable that contracted cashflows from the assets will be sufficient to allow the operating company to send cash up to the borrower for debt service. The operating company sends both quarterly dividends and shareholder loan repayments up to the borrower.

The lenders could cope with this distance from the physical assets because the borrower benefits from the terminal’s strong competitive position. Universal Terminal is the largest single site petroleum storage facility in Singapore, and has produced predictable cash flow since it started operations in early 2008, thanks to several contracts with oil majors covering the terminal’s capacity.

The Hin Leon group is also providing a guarantee to lenders in the event that the project company is unable to renew at market rates any of the capacity contracts that mature before the scheduled maturity of the loan five years from now. The lenders can probably also draw comfort from the fact that both the sponsor and the company’s other shareholder, PetroChina International, are major offtakers as well.

Additional protections include restrictions on additional indebtedness at the operating company and holding company (aside from shareholder loans) while the debt is outstanding, ring-fencing of the company’s assets from encumbrances, and an obligation to maximise dividend payments to the holdco with any incremental cash swept at 100%. PetroChina, while displaying little interest in adding leverage to the operating assets, is understood to have consented to these lender-friendly measures.

The Hin Leong group opted to close the financing with a small group of relationship banks, as the sponsor did not want close to be delayed if a syndication process dragged on. The lenders launched the deal to the market shortly after signing and pre-funding the transaction in September, and were able to finalise allocations in December.

Out of the three bookrunners, DBS and Maybank took $210 million each, while Standard Chartered kept $150 million on its books. Bank of China joined as mandated lead arranger and bookrunner and took $200 million. CBA and HSBC both took mandated lead arranger status and were allocated $75 million each, along with China Citic Bank, which was allocated $200 million.

Lead arrangers Bank of East Asia, CTBC Financial Holdings and SMBC were allocated $50 million each, while Hong Leong Finance took $300 million. The loan has a weighted average life of 4.68 years, with lenders earning fees of between 90bp and 110bp depending on their status. The loan priced at 290bp over Singapore’s 3-month swap offer rate.