February 23, 2009
Canadian chemicals company Nova Chemicals' decision to accept a US$2.3 billion bailout from Abu Dhabi-based state-owned International Petroleum Investment Co. (IPIC) offers a view into a sector that might remain hot even as the economy struggles in 2009.
According to Bloomberg, Nova needed a capital injection badly, as it was at risk of failing to live up to lending requirements. The company recently had difficulty securing an additional US$150 million in funding to stay afloat amid massive losses due to plummeting consumer demand.
The deal marks a historic moment in Canada, says Philip Brown, who led Torys' team advising IPIC (a first-time client who selected Torys after reaching out to several Canadian firms). The Abu Dhabi company will become the first foreign sovereign wealth fund to take 100% ownership of a Canadian company.
Of the $2.3 billion, about $499 million would cover Nova shares, and the rest would go toward assuming Nova's debt. IPIC will also provide a US$250 million credit backstop for Nova, which will be run independently from IPIC.
"This was a very unique deal," says Phil. The deal is a takeover and a loan at the same time, which is rare. Two different sets of documents had to be written with separate financial covenants that nonetheless had to overlap.
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