WB guarantees new Masan loan

Masan became the first private sector company globally to secure MIGA largest corporate finance loan

The proceeds will be used to refinance the existing $108 million loan and to further invest in the Masan Group’s consumer-related businesses. The firm, the  largest private sector company  in Vietnam by market capitalisation will take a new loan facility that bears a lower interest rate than the previous $108 million loan provided in 2011.

Of the new loan facility, $150 million is guaranteed by the Multilateral Investment Guarantee Agency (MIGA), a World Bank member. MIGA only supports investments that are developmentally sound and meet high social and environmental standards. Masan is the first private company in Vietnam and South East Asia to secure MIGA support for a corporate finance loan.

MIGA said late this June, it has issued a guarantee of $167.7 million (Gross exposure) covering a non-shareholder loan by the Hong Kong branch of American bank JPMorgan and other financial institutions yet to be identified. JPMorgan will act as the Primary Rate Interface (PRI) facility agent for a loan to support the expansion and improvement of Masan Group’s consumer products business in Vietnam covering a $150-million loan to refinance existing debt and general corporate purposes, including investments in fixed assets, in addition to an estimated $26.5 million for associated interest.

The project will help Masan underpin its current consumer product operations in Vietnam, diversify its products portfolio, and increase its production capacity in the FMCG business.

The project’s expected development impacts include increased food security and safety, job creation, significant tax revenues, and improved environmental and social standards.

The project will also benefit small and medium enterprises (SMEs), as the company currently purchases raw fish sauce from 40 traders who in turn source from over 100 producers. Masan’s products are sold by 130,000 SME retailers through 100 independent SME distributors operating in all 64 cities and provinces of Vietnam.

The project is in line with the World Bank Group’s strategy to support private sector growth through IFC lending and MIGA guarantees. This is the largest corporate finance loan MIGA has supported in respect to a private sector company globally.

The MIGA requirements for its investment guarantee focus on accountability, including environmental and social safeguards; institutional integrity; and information disclosure.

The agency has so far guaranteed just six Vietnam projects, including Masan. The other projects are outside the private sector, and all the previous assurances were for smaller loan facilities in terms of finance. The biggest of them, $133 million, went to Phu My 3 power plant while the others ranged from $1.9 million to $36 million.

As for Vietnam, MIGA said it had received guaranteed proposals for Nghi Son Oil Refinery ($1.5 billion proposed), Hanoi-Hai Phong Expressway ($650 million proposed), and National Highway 20 ($400 million proposed).

Masan Consumer has created some of the country’s most recognised food brands, such as Chin-su, Omachi, Kokomi, Nam Ngu and Tam Thai Tu. The May 2013 Kantar Worldpanel Brand Footprint Ranking for Vietnam showed that Chin-su is one of the five most chosen brands in the ountry’s food sector. Chin-su, with different food product ranges such as fish sauce, soya sauce and chilli sauce, came second after Vinamilk, Vietnam’s largest dairy company. Masan Consumer has continually transformed its safety and environmental practices to conform to international standards. The management team has developed a certified management system for ISO 22000, 14001 and OHSAS 18001 as well as Hazard analysis and Critical Control Point (HACCP) for food and safety for its operations where applicable.

The World Bank has categorised Masan Consumer as a Category B project for MIGA due to the limited number of specific environmental and social impacts. This January, US private-equity firm KKR announced a $200 million investment to increase its equity stake in Masan Consumer, putting its total stake in Masan at $359 million, its biggest investment in Southeast Asia. The transaction is subject to regulatory approvals and other customary closing conditions.

According to market analysts, Masan’s achievement of an MIGA guarantee was a good signal for Vietnamese companies, because Asia-Pacific projects guaranteed by the World Bank’s arm accounted for just 8 per cent of the total worldwide in 2012, with a total of just $306 million.