The Challenger - Société Générale

  • 21 Jun 2006
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French connections

Société Générale's strength in project finance is built on the way its teams interact. Nick Briggs reports.

It's good to talk, or, as the French might say, ça fait du bien de parler. Société Générale was second in last year's bookrunner league table for EMEA project finance, arranging 13 deals worth $5.29bn, and second in 2004 when it arranged 10 deals worth $2.65bn.

The bank's ability to strengthen its position over the last 2-1/2 years owes much to the way its project and infrastructure finance teams communicate.

"The traditional definitions of project, leveraged and acquisition finance are being tested, and sponsors are becoming more ambitious," explains Steve Swift, head of EMEA loan syndications at Société Générale in London. "Project finance has become the anchor point."

As an example, Stephen Craen, a managing director in the bank's project finance team, points to Société Générale's reserve-based lending business — run by Kevin Price — which can use the expertise of the bank's in-house financial engineers and export finance teams to structure its deals.

And, says Craen, the bank's project finance origination and sales teams have extended their reach into LNG (liquefied natural gas) shipping finance by working with Gaurav Seth, who was appointed Société Générale's head of global LNG shipping finance in London last April.

The bank has also benefited from its strong track record in financial advisory work.

Two years ago project finance banks started to take a more relaxed approach to country risk, particularly in regions like the Middle East, so that some projects can now be financed entirely by commercial banks using tried and tested documentation.

"Debt structures have become commoditised — arranging groups often comprise 30 to 40 lenders, and banks will consider tickets of $125m-$150m, twice what they were willing to commit two years ago," says Stéphane Renard, head of structured finance loan syndicate at Société Générale in Paris.

"Profitability in those markets comes from linking up with the advisory business, as we did on both Egyptian LNG deals," he continues. "Société Générale became more active in oil and gas three or four years ago, and was one of the first banks to adopt that approach — now it is much more widespread."

Steve Swift adds: "We often look for financial advisory opportunities where we don't have to put our balance sheet to work immediately, and we look for infrastructure deals, such as recent financings for French toll roads, where we can put different skills to good use."

The bank has also worked hard to broaden the scope of its deals, which now range from the Canadian mountain pass of the Sea-to-Sky highway improvement project to the exploratory depths of the Kupol gold mine in the Russian province of Chukotka.

Last year's C$498m Sea-to-Sky deal, on which SG was a bookrunner and administration agent, used a UK model to structure and syndicate one of the first public-private partnerships (PPP) in Canada. SG was also a bookrunner on the C$600m 28 year financing for the Richmond-Airport-Vancouver project, the largest Canadian PPP of 2005.

Kupol, meanwhile, involved the biggest limited recourse financing for a Russian mine — $400m of 6-1/2 and seven year debt — and the largest globally for a gold project.

Société Générale will be hoping it can strike a similarly rich seam during the rest of 2006 and beyond.

Key people: Robin Baker, Stephen Craen, Karen Moreland, Gavin Munro, Stéphane Renard, Steve Swift

Key hires: Gaurav Seth, who became Société Générale's head of global LNG (liquefied natural gas) shipping finance in April 2005. He joined from ANZ.

Key clients: Macquarie, Eiffage, Egyptian LNG (right)

Key deal in 2006: The Eu5.85bn loan backing Eiffage and Macquarie's acquisition of Autoroutes Paris-Rhin-Rhone (APRR)

Number of staff: c. 50

League table position (2001-05): 19, 1, 8, 2, 2

  • 21 Jun 2006

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5 UBS 1,219.50 7 6.10%