Panda Ethanol Chooses Quick Cash

Panda Ethanol wanted to find a fast and efficient way to finance the construction of its first biomass-fueled ethanol facility, so it tapped the bank market.

  • 08 Sep 2006
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Panda Ethanol wanted to find a fast and efficient way to finance the construction of its first biomass-fueled ethanol facility, so it tapped the bank market. Instead of choosing to go with a bond deal, the company chose a project finance credit for its speedy nature and the lead bank's experience with that type of financing. "We had our bank syndicate kickoff in May and closed by July ­ probably saved 30 to 60 days," said Michael Trentel, cfo.

The credit will be used to finance construction of a biomass-fueled ethanol plant, which utilizes corn crops to produce fuel that can be integrated with fossil fuels to reduce pollution. The facility will generate steam, which will be used to manufacture ethanol by gasifying more than one billion pounds of cattle manure a year. "This is a significant step for our company and a great step for the industry," Trentel said. Once completed, the facility will be the largest biomass-fueled ethanol plant in the United States.

"The project was at the stage where we required additional capital," Trentel said. "We were ready to get out of the development stage and into the construction stage." Société Générale leads the new $188 million credit, which consists of a seven-year, $158.1 million credit facility broken into a $63.1 million "A" tranche and a $95 million tranche "B." Both tranches are priced at LIBOR plus 3 3/4% during construction of the new facility and drop to LIBOR plus 3 1/2% during operation. There is also $30 million of 12% senior subordinated notes due 2013.

The company chose to use Société Générale as the lead bank because its parent company, Panda Energy, had a previous working relationship with the bank ­ most recently for a 2001 financing, according to Trentel. "We went out and solicited lead arrangers and got bids from several other parties, but we chose SG," Trentel said. "They've been around the block on project finance." He declined to comment on which other banks the company approached. He cited Panda's prior experience with SG and the bank's ability to "get their heads around the technical aspects" of project finance as the ultimate deciding factors.

Dallas-based Panda has several other ethanol facility projects on the horizon, including three already announced in Texas, Kansas and Colorado, Trentel said. Over the next three years, Panda Ethanol plants will be producing approximately 1.2 billion gallons of ethanol annually, replacing about 30 million barrels of imported oil. "We're ready to get out into the market again for future financings," he stated, but wouldn't comment on whether the company would be sticking with SG as a lead. "We like to keep a broad distribution of folks," he said.

  • 08 Sep 2006

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Citi 3,237 10 19.12
2 Goldman Sachs 2,096 5 12.39
3 Morgan Stanley 1,965 5 11.61
4 BNP Paribas 1,686 6 9.96
5 Barclays 1,565 4 9.25

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4 Bank of America Merrill Lynch 23,023.30 73 8.56%
5 Barclays 16,546.45 55 6.16%