Bangchak petroleum signs Bt29-bn loan

Bangchak Petroleum yesterday signed a Bt28.98-billion syndicated loan to increase liquidity and refinance its debts.

The loan has been secured from six banks - Siam Commercial Bank (SCB), Bank of Ayudhya, Siam City Bank, TMB Bank, ABN Amro and Mizuho Corporate Bank - and will be used to refinance its debts and for reserve as working capital to support business expansion and shield against volatility from external factors, said president Anusorn Sangnimnuan.

Senior executive vice president and CFO Patiparn Sukorndhaman said the main purpose of refinancing was not the interest-rate margin, but Bangchak would like to enhance its liquidity and flexibility because existing loans will come due in the next six years.

The new loan will extend the company's loan maturity to nine years, he said.

The company plans to spend a small proportion of the loan in the first four years and more in the fifth to ninth years. The facility will save the company Bt1 billion-Bt1.5 billion each year.

"As the Product Quality Improvement Project will be finished next year, the company will have more streams of income," Patiparn said. "Therefore, we will have more cash flow for new investment or to cushion possible worse cases such as foreign-exchange loss. If we face this situation, we will still have sufficient cash to overcome the worse case."

Another advantage is that the company's loan structure is changed.

The interest rate charged for the existing debts is a floating rate based on the minimum lending rate, and they are 100-per cent Thai-denominated loans. But the new loan is a US dollar-denominated loan, which matches with the firm's income. Moreover, the new loan offers a fixed interest rate for a certain period.

"Earlier, we were charged 7-per-cent interest. The interest rate for the new loan is 6 per cent. However, the interest-rate margin is not the main purpose of the deal," he said.

The new loan is a clean loan (debt without any collateral), which allows the company to have more flexibility in asset management.

Bangchak's loans are to finance projects, which normally need assets to back the loan.

"In the past, when we wanted to make any decision such as borrowing from other banks, increasing the loan amount, or expanding our investment, we needed to talk to creditors first, but these conditions are eased by the new loan. Banks that extended us the loan have already evaluated risks, so they trust in the company," said Patiparn.

SCB president and CEO Kannikar Chalitaporn said his bank had extended 60 per cent of the syndicated loan, or Bt17.1 billion.