India's Sanmar Group Procures $868 Million Loan for Chemicals Project in Egypt

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Researched by Industrial Info Resources (Sugar Land, Texas)--TCI Sanmar Chemicals LLC (Port Said, Egypt), a part of Chemplast Sanmar Limited (BSE:506355) (Chennai, Tamil Nadu), recently procured a $868 million loan to finance its vinyl chloride monomer to polyvinyl chloride conversion (VCM/PVC) project at Port Said.

TCI Sanmar, formerly known as Trust Chemical Industries LLC, was acquired in March 2007 by the Sanmar Group, which has diversified interests in the metal, chemical, specialty chemical, shipping and engineering sectors.

TCI Sanmar procured the loan from a consortium of Indian banks. The arrangement makes it one of the first major international project loans ever to be fully funded by Indian banks. The financing banks include the Bank of India (BSE:532149) (Mumbai), the State Bank of India (BSE:500112) (SBI) (Mumbai), the ICICI Bank (BSE:532174) (Mumbai), the Indian Overseas Bank (BSE:532388) (Chennai, Tamil Nadu), the Axis Bank (BSE:532215) (Mumbai), the Bank of Baroda (BSE:532134) (Mumbai), the Export-Import Bank of India (Mumbai), the Indian Bank (BSE:532814) (Mumbai), the Union Bank of India (BSE:532477) (Mumbai), and the Syndicate Bank (BSE:532276) (Manipal, Karnataka). SBI's branch in Bahrain will play the role of facility agent, offshore security agent, and offshore account bank for the loan.

The loan arrangement includes a long-term loan of $565 million. In addition, the Arab African International Bank (Cairo, Egypt) has offered to provide $70 million toward working capital and will act as the onshore account and onshore security agent. The remaining funds will be obtained through a mix of equity and internal accruals. Achieving financial closure for a project of this size is being hailed as a significant achievement in view of the prevalent global economic crisis.

The Sanmar Group acquired Trust Chemical Industries LLC for $275 million in 2007 to form TCI Sanmar Chemicals LLC. TCI Sanmar currently operates manufacturing facilities at the tip of the Suez Canal in Port Said to produce 180,000 tons per year of chlorine, 4,900 tons per year of hydrogen, 220,000 tons per year of ethylene dichloride, and 200,000 tons per year of caustic soda. The firm plans to enhance production of caustic soda to 275,000 tons per year.

The new VCM/PVC project being implemented by TCI Sanmar as part of an expansion program will make the facility Egypt's largest chlor-alkali plant. TCI Sanmar plans to start commercial production of the new VCM/PVC plant by early 2010. The upcoming production facility at Port Said is designed to produce 400,000 tons per year of VCM. About half of this will be converted through a polymerization process to yield 200,000 tons per year of PVC. The products will primarily cater to the domestic demand.

Once TCI's new facilities begin production, the Sanmar Group will be rated among the top 10-15 producers of PVC in the world with a total installed capacity of 460,000 tons per year. This includes the group's new 200,000-ton-per-year greenfield PVC unit being developed in Cuddalore, Tamil Nadu, at a cost of $117 million. This unit is likely to use nearly half of the VCM produced at TCI's facility in Egypt. As cost of electricity is lower in Egypt than in India, TCI will function as the Sanmar Group's low-cost producer, leading to savings in the long run.

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