Ecopetrol S.A. obtains authorization to execute a USD 1,200 million debt management transaction

Rhea-AI Summary

Ecopetrol S.A. secures a USD 1,200 million loan for debt management and maturity refinancing strategy, approved by the Ministry of Finance and Public Credit. The loan, with a term of five years, involves multiple lenders and confirms international financial sector support. The company complied with all required procedures to obtain the loan, with terms reviewed and authorized by the MHCP. The agreement outlines events of default, lender recourse, and is governed by New York law. Ecopetrol, a major energy company in Colombia and the Americas, has diverse operations in hydrocarbon production, transportation, logistics, refining, petrochemicals, gas distribution, energy transmission, and exploration in various countries.

Financial Analyst

The recent announcement by Ecopetrol S.A. regarding a new loan of up to USD 1,200 million is a significant financial move, reflecting the company's ongoing debt management strategy. The involvement of prominent international banks in the loan agreement underscores the financial sector's confidence in Ecopetrol's creditworthiness and strategic direction. This refinancing effort may be seen as a proactive measure to streamline the company's debt profile, which could lead to a more favorable interest rate environment for Ecopetrol, potentially reducing interest expenses over the term of the loan.

Investors should note the five-year term and the variable interest rate, which indicates exposure to interest rate fluctuations that could affect future financial commitments. The principal's repayment at maturity suggests that Ecopetrol is betting on its ability to generate sufficient cash flows to cover the lump sum payment. This strategy can be effective in managing short-term liquidity but requires careful monitoring of the company's cash flow forecasts and the broader economic context that could affect its revenue streams, particularly as it is heavily involved in the hydrocarbon sector, which is sensitive to global market dynamics.

Legal Expert

From a legal perspective, the loan agreement's adherence to the law of the State of New York is a strategic choice, given New York's status as a global financial hub with a well-established legal framework for such transactions. The inclusion of standard events of default clauses provides a safety net for the lenders, ensuring that they have the right to demand early repayment if Ecopetrol fails to meet its obligations. This level of detail in the agreement highlights the thoroughness of the legal due diligence process and the robustness of the contractual protections in place.

For stakeholders, the regulatory oversight by the Colombian Ministry of Finance and Public Credit is a reassuring signal, as it implies a level of governmental support and scrutiny. The authorization of the loan by the MHCP also suggests that this financial maneuver aligns with broader economic policies and objectives within Colombia, which may have implications for the company's strategic positioning within the country's energy sector.

Market Research Analyst

Looking at the broader industry context, Ecopetrol's significant role in the American continent's energy sector, with its diverse portfolio spanning hydrocarbon production, energy transmission and even road concessions, positions the company as a key player in the region. The loan could facilitate further growth and consolidation of its market position, especially in light of its recent acquisition of a majority stake in ISA. This move into energy transmission and related sectors indicates a strategic diversification that can mitigate risks associated with the volatile oil and gas markets.

Market trends show an increasing focus on integrated energy companies developing a more resilient and diversified business model. Ecopetrol's strategy, supported by this loan, seems to align with these trends. However, the success of this approach will depend on the company's execution of its investment plans and its ability to manage the complexities of an expanded operational scope while maintaining financial stability.

BOGOTA, Colombia, March 20, 2024 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) informs that, as part of its comprehensive debt management and maturity refinancing strategy, the Ministry of Finance and Public Credit ("MHCP"), through Resolution 0652 of 20 March 2024, has approved the execution of a loan of up to USD 1,200 million.

The loan will be executed by and among Ecopetrol, as borrower, and Bank of Nova Scotia (USD 300 million), BBVA Securities Inc. (USD 250 million), Bank of America, N.A. (USD 200 million), JPMorgan Chase Bank, N.A. (USD 200 million), Itaú Chile New York Branch (USD 100 million) and Standard Chartered Bank Hong Kong Limited (USD 150 million), as lenders. The term of the loan will be five (5) years; principal will be repaid at maturity; and interest will be subject to a variable rate previously agreed by the parties.

The loan was approved by the MHCP, given Ecopetrol's request to refinance the USD 1,200 million outstanding under a previously-executed loan authorized by Resolution 1824 of July 30, 2021, and which expired on August 16, 2023.  Such loan authorized in 2021 was disbursed on September 29, 2022 to refinance the debt contracted for the acquisition of Interconexión Eléctrica S.A.

In order to obtain the loan, the Company complied with all the required internal and external procedures and approvals.

The terms of the loan confirm the support and confidence of the international financial sector in the strategy of the Ecopetrol Group.

Pursuant to Colombian regulation, the MHCP reviewed and authorized the terms of the agreement, which provide for events of default by the borrower, such as failure to make timely payments of principal and interest, possible impairment of the borrower's ability to pay, impairment of the integrity of the borrower's financial information, and failure to comply with contractual obligations, among others, which are frequently used in transactions of this nature. Should any of these events materialize, lenders would be entitled to claim early repayment of the debt, according to the procedure foreseen in the contract. Likewise, the loan agreement establishes Ecopetrol's right of recourse against the lenders when they fail to make disbursements under the terms of the loan. All of the above, in accordance with the law of the State of New York, which is the governing law of the agreement.

Ecopetrol is the largest company in Colombia and one of the main integrated energy companies in the American continent  with more than 18,000 employees. In Colombia, it is responsible for more than 60% of the hydrocarbon production of most transportation, logistics, and hydrocarbon refining systems, and it holds leading positions in the petrochemicals and gas distribution segments. With the acquisition of 51.4% of ISA's shares, the company participates in energy transmission, the management of real-time systems (XM), and the Barranquilla - Cartagena coastal highway concession. At the international level, Ecopetrol has a stake in strategic basins in the American continent, with Drilling and Exploration operations in the United States (Permian basin and the Gulf of Mexico), Brazil, and Mexico, and, through ISA and its subsidiaries, Ecopetrol holds leading positions in the power transmission business in Brazil, Chile, Peru, and Bolivia, road concessions in Chile, and the telecommunications sector.

This press release contains forward-looking statements which are based on current expectations and assumptions about future events and which can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "estimate", "intend", "continue", or "believe" or other words of similar import, and which forward-looking statements also include certain projections, forecasts, budgets and other estimates. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond the Ecopetrol's control. Ecopetrol does not undertake any obligation to provide any additional information or to update this press release or to correct any inaccuracies that may become apparent, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release.

For more information, please contact:

Head of Capital Markets 
Carolina Tovar Aragón  
Email: investors@ecopetrol.com.co 

Head of Corporate Communications (Colombia) 
Marcela Ulloa  
Email: marcela.ulloa@ecopetrol.com.co

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SOURCE Ecopetrol S.A.

What is the purpose of the USD 1,200 million loan secured by Ecopetrol S.A.?

The loan is for debt management and maturity refinancing strategy.

Who approved the loan for Ecopetrol S.A.?

The Ministry of Finance and Public Credit approved the loan.

What is the term of the loan obtained by Ecopetrol S.A.?

The loan has a term of five years.

Which lenders are involved in the USD 1,200 million loan for Ecopetrol S.A.?

Bank of Nova Scotia, BBVA Securities Inc., Bank of America, JPMorgan Chase Bank, Itaú Chile New York Branch, and Standard Chartered Bank Hong Kong are the lenders.

What events of default are outlined in the loan agreement for Ecopetrol S.A.?

Events of default include failure to make timely payments, impairment of borrower's ability to pay, integrity of financial information, and failure to comply with contractual obligations.