Thu 11/12/2020 03:04 AM
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UPDATE 1: 3:04 a.m. ET 11/12/2020: Tianqi Lithium has hired Alvarez and Marsal as financial advisor as it is unable to meet the looming $1.88 billion loan maturity on Nov. 29, while all strategic investors have dropped out of negotiations with the company, said three sources familiar with the matter.Continue reading for the Asia Core Credit team's analysis of Tianqi Lithium, and request a trial to access reporting and analysis of hundreds of other stressed, distressed and performing credits. 

Talks between Tianqi and its lenders over possible extensions to the outstanding amount of an originally $3.5 billion acquisition financing are ongoing, but 100% lender consent is required for such an amendment. Negotiations on extending the loans only commenced in mid-October, after discussions with potential strategic investors in the distressed lithium maker ended. Lender approval has not yet been granted for an extension.

Ahead of the looming Nov. 29 maturity, China CITIC Bank International has begun sounding interest from hedge fund buyers for its $485.5 million hold of an originally $1 billion mezzanine loan, as reported.

Tianqi and A&M did not respond to a request for comment.

Strategic Investors

Tianqi had told its credit investors in the past few months that the central government owned China Non-ferrous Metal Company Limited, and Sichuan state-owned Sichuan Development Holding Co., Ltd. were prospective strategic investors, but it is understood that negotiations with both parties have ceased since mid-October, said two of the three sources.

It was at that point that lenders and Tianqi began formal talks about asset disposals, a potential amendment and extension of the maturing loans, and a potential restructuring for the broader company, but lenders have yet to decide on granting an extension, the two sources said.

Tianqi in a September announcement said it had suspended some interest payments on the acquisition loan, and that unpaid interest at that point amounted to RMB464 million ($70.2 million), as reported.

Lenders to the outstanding $581.9 million mezz loan due on Nov. 29 include BNP Paribas, China Minsheng Bank, Industrial and Commercial Bank of China and Societe Generale, while China CITIC Bank, Chengdu Branch is the sole lender of the $1.3 billion senior tranche A due on Nov. 29, and the $1.2 billion senior tranche B due in 2022, as reported.

Both tranche A and B are now understood to be handled by the special asset team of China CITIC Bank, Beijing Branch, said two of the three sources.

Security

The major holder of the mezzanine loan, China CITIC Bank International has been sounding the market to auction the $485.5 million mezzanine loan hold of Tianqi and sought pricing in the mid-80s but initial indications have prospective buyers looking at pricing in the 60s and 70s, as reported.

Tianqi in 2018 acquired a 23.8% non-controlling stake or 62.6 million shares in SQM, the world’s second largest producer of lithium, for $4.1 billion.

The $3.5 billion three-tranche loan was used to finance the acquisition, as reported.

Under terms of the facility, CITIC Bank, Chengdu Branch, lender to the senior tranches A and B, has a first lien claim against 71.4% of the SQM stake acquired by Tianqi, and a second lien claim against the remaining 28.6% stake, while the lenders to the mezzanine loan have a first lien claim against the 28.6% stake, according to Morgan Stanley Huaxin’s A share placement report (Chinese).

Tianqi has also pledged its entire equity stakes in wholly-owned subsidiaries Tianqi Lithium UK Limited and Tianqi Lithium Kwinana Pty Ltd, as well as their assets, as additional collateral for the originally $3.5 billion syndicated loan, according to an announcement dated Oct. 10, 2019 and two buyside sources.

The Greenbushes mine in Western Australia is the largest operating lithium mine in the world and is jointly owned by Tianqi Lithium and Albemarle. Tianqi UK and Albemarle respectively hold 51% and 49% of Winfield, which in turn wholly owns Talison Lithium, the operator of Greenbushes, as reported.

HSBC Sydney arranged a $370 million syndicated loan for Winfield, which is the operating company of Tianqi UK in 2017, which was then upsized to $770 million last year. The loan is due in June 2021 and guaranteed by assets of Winfield and Talison Lithium with the mining rights as collateral, according to Tianqi’s 2019 interim report.

SQM’s market capitalisation was $5.06 billion and the closing price was $42.07 per share as of Nov. 11 but Tianqi paid $65 per share for the 23.8% SQM stake in 2018, as reported.

However, the ability of lenders to enforce and gain control of the shares and assets pledged as collateral to the loan is still unclear, two market participants said.

A&M is the company side financial advisor. Deloitte and Allen & Overy are the lenders' financial advisor and counsel, as reported.
































Tranches Outstanding Amount Duration Interest Rate Security
Senior Tranche A $1.3 billion 1 year plus 1 year extension (Due on Nov. 29, 2020) L+2.7%, extra 0.2% for extension, payable quarterly -First lien claim against the 71.4% of the 23.8% non controlling SQM stake acquired by Tianqi
-Second lien claim against the 28.6% of the 23.8% non controlling SQM stake acquired by Tianqi
-Tianqi Lithium UK Limited as well as its assets
-Tianqi Lithium Kwinana Pty Ltd as well as its assets
-20% stake held in Tibet Shigatse Zhabuye
-84.4% stake held in Chongqing Tianqi
Senior Tranche B $1.2 billion 3 years plus 2 one-year extensions L+ 3.7%, extra 0.2% for each extension, payable semi-annual
Mezzanine Loan $581.9 million 1 year plus 1 year extension (Due on Nov. 29, 2020) L+2.7%, extra 0.2% for extension, payable quarterly -First lien claim against the 28.6% of the 23.8% non controlling SQM stake acquired by Tianqi


 




Original Story 3:45 a.m. UTC on Nov. 11, 2020

BREAKING: Tianqi Lithium Hires A&M as Financial Advisor Ahead of $1.88B Looming Loan Maturity on Nov. 29

Chinese lithium producer Tianqi Lithium has hired Alvarez & Marshal as financial advisor as it faces the maturity of two loan facilities totaling $1.88 billion that backed the acquisition of 24% of  Sociedad Minera y Quimica de Chile (SQM), said two sources familiar with the matter.

A&M did not immediately respond to a request for comment.

More to come...

--Shirley Li
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