Leaked Credit Suisse document puts Proindicus and MAM activities at US$372-million

leaked document

A leaked document produced by Credit Suisse in 2013 to support its financing of Proindicus shows that the supplier to all three companies (Ematum, MAM and Proindicus), Iskandar Safa’s Privinvest group, offered Mozambique a comprehensive coastal security solution for US$372-million. How, then, was the additional US$1.6-billion spent?

According to the leaked document, titled US$372,000,000 Term Loan guaranteed by the Ministry of Finance of the Republic of Mozambique, which was made public by Zitamar News, the country sought funds for the construction and installation of a monitoring and protection system for the entire coast.

The transaction overview of the document is as follows:

The Republic of Mozambique (“Mozambique” or the “Republic”) (rated B+ by Standard & Poor’s and B by Fitch) is looking to commission the construction and installation of a monitoring and protection system for its national waters / 30 nautical miles (NM) from the coast (the “Exclusive Economic Zone” or the “Project”). When Mozambique can monitor and survey its national waters it will be able to charge a fee to freight transporters and extractive industriesworking in this area for this service – who in turn benefit from safer transit and lower security costs and insurance premiums. Mozambique’s maritime waters are in continuous use given the coastline forms part of a busy sea route to traverse Africa and access to the ports of South Africa and Maputo. In the first five years from completion the Government and management expect the Project to generate c.US$700-million of revenue which would be sufficient to i) cover the operating expenses of the Project, ii) service the financing related thereto, and iii) generate additional funds for the government.

The Republic has signed a procurement agreement with Privinvest Shipping SAL (Holding) – Abu Dhabi Branch (the “Contractor”) for a turnkey solution. The Contractor (i) is one of the largest global shipbuilding groups for naval vessels, systems, fuel-cell submarines, superyachts, offshore constructions and associated services, and (ii) has a long track record of working with governments in Europe, Africa and South America (over 30 countries in total including France, UK, Germany, UAE, Kuwait and Brazil).

Credit Suisse (“CS” or the “Arranger”) has been mandated by the Ministry of Finance of Mozambique (the “MoF”) to arrange a US$327-million six-year amortising term loan facility (the “Facility”) to finance the Project. The borrower under the Facility will be a 100% government-owned company established for the purpose of acquiring and operating the Project on behalf of the Republic. The borrower’s obligations under the Facility will in turn be unconditionally and irrevocably guaranteed by the MoF. Repayment of the Facility will not in any way be linked to the construction or performance of the Project.

Summary terms:

In the chapter concerning the terms of the loan, the document clarifies that the borrower is Proindicus SA, a Mozambican company created for the purpose of acquiring and operating the project for the protection of the national coast. The document also stipulates that Proindicus is owned by the Ministry of Interior, the Ministry of National Defence and the State Security and Intelligence Service (SISE) of Mozambique.

The document states that the guarantor is the Government of the Republic of Mozambique, acting through the Ministry of Finance. The document also adds that the payment should be made in advance to Privinvest Shipbuilding SAL. In 2013 Ematum transferred all of its money (US$850-million) to a Privinvest company – therefore, it must be asked: what is Privinvest’s role in Mozambican defence procurement?

The details of the project are contained within the three-page document and briefly refer to the acquisition of integrated systems for air, space, sea, river and lake safety, as well as the provision of diverse services in the oil, mining and port area all to the amount of US$372-million.

Where is the remaining US$785-million?

According to explanations given on 8 June in the National Assembly, Proindicus ultimately borrowed US$622-million from Credit Suisse and VTB to set up a coastal protection service – US$250-million more than they were initially told it would cost.

Moreover, the Minister of Economy and Finance said that in 2014, MAM was established and received funding of US$535-million from VTB for the provision of multifarious services in the oil, mining and port sector.

The leaked Credit Suisse document, dated February 2013, makes it very clear that (like with Ematum) the reason behind the creation of Proindicus and MAM was not only the maritime security of the Mozambican coast, as the government of President Filipe Nyusi would have everyone believe. Of the various issues that need to be clarified by the government is the fate of the missing US$785-million, taken out by Proindicus and MAM.

It should be noted that neither company is operational, despite already receiving the US$1.157-billion in loans.

Source: @Verdade/Zitamar News
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