Law firm Clifford Chance has advised IFC, a member of the World Bank Group, on its acquisition of a 9.23% equity stake in Ko Yo Ecological Agrotech (Group) Limited, a company listed on the main board of the Hong Kong Stock Exchange.
The transaction also includes warrants that confer on IFC the right to subscribe for an additional 6.63% interest, making a total equity investment of US$20 million, plus a US$20 million secured loan from IFC to Ko Yo subsidiary, Dazhu Koyo Chemical Industry, to finance the construction and operation of a major ammonia and urea plant in Sichuan province.
Headquartered in Chengdu, Ko Yo is a leading producer and distributor of chemical fertilizers in China. IFC’s investment will help provide much needed funding to the private sector in Sichuan for rebuilding after last year’s earthquake.
IFC fosters sustainable economic growth in developing countries by financing private sector development, mobilizing private capital and providing advisory and risk mitigation services to businesses and governments.
The equity investment was structured such that the issue of new shares and the warrants would be made pursuant to the existing general mandate to issue up to 20% of new shares granted by the shareholders to the directors. The loan was structured to be made to the onshore subsidiary in order for IFC to obtain onshore security in China including mortgages over land and equipment. Most traditional financing structures by offshore lenders involve loans to offshore entities for which it is difficult to obtain onshore security.
Beijing counsel Terence Foo led the cross-office, cross-practice team advising IFC. Partner Andrew Whan and associate Derek Hung, both based in Hong Kong, and senior associate Tianpeng Wang in Beijing, advised on the equity investment. Beijing partner Bruce Schulberg advised on the debt financing, assisted by counsel Patrick Phua and senior associate Maggie Lo in Beijing, and by senior associate Jahwa Ni and associate Priscilla Chen in Shanghai.
IFC’s equity investment was announced on 17 April 2009 and successfully closed on 29 April 2009.
D.C.