Petron to tap int’l banking consortium for $100-M loan

Publicly-listed Petron Corp., the country’s largest oil refiner, has awarded the mandate for a five-year, $100-million loan to the consortium of Citigroup, ING Bank and Saudi American Bank, official documents showed.

A ranking Petron official, in an interview with The STAR, confirmed that they have "been given the go-signal to negotiate and award the mandate to these three banks."

The official said the loan was within the original plan of raising $50 million to $150 million in a syndicated loan. "We originally want to raise $150 million but we were only given an authority to raise and negotiate for $100 million," he said.

Proceeds from the loan, the official said, would be used by Petron to finance its $100-million Clean Air Act (CAA)-related projects, particularly the construction of a hydrotreater and isomerization plants. These two new refineries will enable Petron to produce CAA-compliant fuels.

After the negotiation and documentation process, the syndicated loan would be launched in about two weeks’ time, the official said.

The three-bank consortium outbid other banks including BNP Paribas, BOT-Mitsubishi, DBS Bank, HSBC, Mizuho Corporate Asia HK, as well as some local banks.

"Citigroup, ING Bank and Saudi American Bank are also part of the arranger group that completed a $120-million, three-year loan for the issuer in September 2000," the documents said.

According to the Petron official, they still expect the completion of the two CAA-related plants in the first quarter of 2005.

Only Petron has decided to put up refinery plants that would produce CAA- compliant fuels. The other oil firms are just importing the products to comply with the law.

Documents show that the pricing of the $100-million loan is expected to be right and below San Miguel Corp.’s recently completed $300-million five-year loan which carried an interest margin of 155 basis points over LIBOR for a 3.5-year average life and all-in yield of 167.86 basis points to banks at the top level.

With the implementation of the CAA, the Philippines became the only Asian country with a very strict requirement of 35/2 aromatics/benzene content. Some countries in Asia require only 30-percent aromatics and their benzene level are way above the two percent content.

In January 2003, the CAA provided that only gasoline fuel containing a maximum aromatics and benzene content of 35 percent and two percent (by volume), respectively, may be manufactured, imported, sold, supplied, offered for sale, dispensed, transported or introduced into commerce in the Philippines.