London 29/06/2016 - Dongying Fangyuan Nonferrous Metals and Donying Lufang Metals signed a $385 million structured syndicated loan with a group of 11 banks and Swiss trader Mercuria Energy Group during LME Asia Week in Hong Kong, sources told FastMarkets.
The borrowers are collectively known as Shangdong Fangyuan Nonferrous Metals Group.
"To put it simply, the borrowers will use the loan to purchase copper concentrates and sell cathodes to Mercuria, then repay the banks," a source close to the matter said.
The 11 participating banks are Deutsche Bank, ING, Societe Generale, ABN AMRO, CITIC Bank International, First Gulf Bank, KDB Bank, Nanyang Commercial Bank, Sumitomo Mitsui Banking Corp, ICICI Bank and Monte dei Paschi di Siena.
The deal, which is for a year, was oversubscribed, a second source with direct knowledge of the deal said.
The agreement is led by Deutsche Bank, which is expected to release the funds from the loan from next month.
"Fangyuan will only need to pay back Deutsche Bank... the German bank will internally sort out the interest earned on the deal with other banks," the first source said.
But details such as interest rates, the split of the loan between banks and the risk-adjusted return on earnings remain unknown due to the confidentiality of the matter.
Shangdong Fangyuan will sell 60,000-70,000 tonnes of copper cathodes to Mercuria under the terms of the deal, mostly probably from seven month after the commencement date, sources added.
Dongying Fangyuan was established in 1998 in Shangdong Province, China, while Dongying Lufang was built in 2006 - total production was 608,000 tonnes of copper cathodes in 2015, according to its official website.
It is believed that the loan will enable Fangyuan to boost processing capacitiy to around 1.2 million tonnes per year of copper concentrates on top of its existing smelting capacity, which it has been lifting since October last year.
Mercuria signed a similar $320 million financing agreement with private copper smelter Yangu Xiangguang Copper and 11 lenders in 2014.
(Edited by Mark Shaw)