Monday, August 27, 2007

Merrill breaks ground with coal mine financing

Mother Merrill getting dirt on her skirt.

The bank increases its involvement in the privately arranged deal for an Indonesian coal producer.

Merrill Lynch has put its own money to work alongside a couple of hedge funds in yet another highly structured equity deal, which will provide financing for an Indonesian coal mine at a time when global demand for this commodity continues to increase.

The $135 million transaction stands out not only because it was completed last week in the midst of one of the most volatile periods in Asian equity markets in recent years, but because it is a greenfield project that currently contains nothing more than the coal in the ground, a reserve report and a management team.

In an unusual move for an investment bank – especially in a deal it is structuring itself - Merrill Lynch has also entered into an exclusive multi-year offtake agreement to buy all the coal produced by the new mine in the initial years. This level of involvement is noticeable because it significantly increases Merrill’s exposure to the project, but makes sense when one takes into account that the US investment bank also owns commodity and energy trading firm Entergy-Koch, which is keen to get its hands on more physical coal....More from FinanceAsia