Ten law firms spanning four jurisdictions have convened to assist Brazil′s Schahin Group in what is thought to be the first ever refinancing of a Petrobras-chartered drill ship through the issuance of public debt.

The Lancer Finance Company, a special purpose vehicle set up by Schahin, issued bonds worth US$270 million on 21 October.

Linklaters and its Brazilian arm, Lefosse Advogados, assisted Lancer, with Conyers, Dill & Pearman providing advice on British Virgin Islands matters from its São Paulo office.

"All of the project financings of new drill ships that are chartered to Petrobras have been done as bank deals and I believe any that have been refinanced have also been done as bank financings,"says Linklaters partner Michael Bassett, explaining the importance of the deal. "So this is the first time a deal of this size, and perhaps of any size, has been done in the capital markets."

The initial purchasers, Nomura Securities International and Santander Investments Securities, were represented by Hogan Lovells LLP in the US and Souza, Cescon, Barrieu & Flesch Advogados in Brazil.

Pillsbury, Winthrop, Shaw, Pittman LLP and Brazil′s Machado, Meyer, Sendacz e Opice Advogados provided counsel to Deutsche Bank, the trustee in the deal, and WestLB sought advice from Clifford Chance LLP.

In Panama, Farara Kerins provided the guarantor, Schahin, with assistance and Arias, Fábrega & Fábrega assisted Turasoria, holding company of the drill ship.

The bonds are securitised by the vessel, the SC Lancer, whose drilling contract with Petrobras ensures a steady flow of revenue.

The financing was done through an SPV located in the British Virgin Islands to allow the company to access the international debt markets rather than trying to raise funds solely in Brazil.

"It is an interesting structure," says Conyers Dill partner Alan Dickson. "We′re seeing other Brazilian clients looking to use the same kind of structure to issue debt on the international market."

Refinancing the project with an issuance of debt rather than with a traditional bank loan should eliminate risk, as it allows "deal sponsors, Schahin and other operators of offshore vessels and rigs to achieve better rates"and could help banks to "free up their books of Petrobras credit risk, which will allow more room to finance future Petrobras chartered vessels", says Bassett.

"I think this is a benefit that other issuers will try to take advantage of," he says. "Bond investors don′t have to consider construction risk and the rates in the capital markets are likely to be better because of the elimination of that risk."

Negotiations for the refinancing took 10 months. "It was a complicated transaction, the first of its kind, and therefore it took a little while to get done but the end result was good," says Bassett. "All of the advisors worked together very well and we had a constructive working relationship."

Both Linklaters and Conyers Dill have assisted Schahin in previous projects.

"We had set up another structure for Schahin involving completely unrelated projects about a year ago, and they came back to us when they were thinking of doing this transaction,"explains Dickson.

Linklaters has worked on projects for Schahin since late 2006, when Linklaters teams from the US, the UK and China, and Lefosse in Brazil assisted the group in securing a syndicated loan for the ′Black Gold′ deal, the construction of two drilling ships for Petrobras that are about to become operational. Milbank, Tweed, Hadley & McCloy LLP and Souza, Cescon, Barrieu & Flesch Advogados represented the banks in that project.

Counsel to Lancer Finance Company

US

·         Linklaters

Partners Michael Bassett, Stan Renas and Ray Fisher, and associates Nicolas San Roman, Lauren Rogoff, Chris Davis, Don Macbean Francisco Duque and Sarah Stein in New York and associates Marcelo Arellano and Chris Willott in São Paulo

Brazil

·         Lefosse Advogados in cooperation with Linklaters

Ricardo Higashitani, Matheus Oriolo, Marcio Sanjar and Luiz Felipe Nunes Marujo

British Virgin Islands

·         Conyers, Dill & Pearman

Partner Alan Dickson and consultant Gabriela Romano in São Paulo and associate Raymond Davern in the British Virgin Islands

Counsel to the Schahin Group

Panama

·         Farara Kerins

The firm was unable to disclose names

Counsel to Turasoria

·         Arias, Fábrega & Fábrega

Partner Roy Durling and associate Pilar Castillo

Counsel to the initial purchasers

US

·         Hogan Lovells LLP

Partner Emil Arca, counsel Russell Slanover and associate Oscar Stephens

Brazil

·         Souza, Cescon, Barrieu & Flesch Advogados

Partner Maurício Teixeira dos Santos and associates Cristina Ramos and Gabriela Engler

Counsel to Deutsche Bank

US

·         Pillsbury, Winthrop, Shaw, Pittman LLP

Partner Joseph Owens and associates Shane Fuhrman and Shaileen Patton

Brazil

·         Machado, Meyer, Sendacz e Opice Advogados

Partner Silvia Fiszman and associate Marina Aidar

Counsel to WestLB

·         Clifford Chance LLP

Partner Jay Gavigan and associates Daniel Winick and Kevin Fernandez

(Latin Lawyer 29.10.2010)