CFO of LBC Tank Terminals
LBC is one of the largest operators of storage facilities for bulk chemicals and oil products. The company possesses and exploits a global network of terminals with a combined storage capacity of nearly 3 million m³. These terminals are spread across key positions in Europe, the United States and China. This year LBC needed to refinance. The choice came down to a combination of preferred debt and hybrid bonds.
LBC Tank Terminals is not a widely known brand. However, worldwide this group belongs to the largest independent operators of storage facilities for bulk liquid products.
The group focuses on providing storage and ancillary services for bulk chemicals and oil products. With activities in the USA, Netherlands, Belgium, France, Spain, Portugal and China, LBC Tank Terminals today manages a total storage capacity of nearly 3,000,000 m³ for its customers.
The headquarters of the company are in Mechelen. This is where the global strategy for the 14 terminals is mapped out. These terminals are spread across 7 countries in 3 continents, and employ 750 people. “A stable business with great growth potential,” says Lucas Barry, CFO of LBC. Over the past 6 months, the LBC group has successfully arranged financing for its long-term growth plans.
12 months ago, the group gained 2 majority shareholders: Dutch pension funds APG and PGGM, who together purchased 65% of the company. The other 35% remains in the hands of Australian institutional investors who have been shareholders of the group since 2007. The company’s customer base is principally made up of large multinational businesses in the chemical and petrochemical sector. LBC’s customers include almost all of the most recognised names in their respective industries.
With the appointment of Brett Simpson as CEO of the group in 2009, followed by the arrival of Lucas Barry as CFO the next year, the group initiated a company reorganisation. This also included moving the company headquarters from Paris to Mechelen "in order to bring our headquarters closer to Antwerp and Rotterdam," as Lucas Barry explained. And also to develop a strategic vision based on the development of a dynamic, group-led ethos and a thirst for expansion. “We are an international company with headquarters in the Benelux region, and we now have Dutch principal shareholders who have the same long-term investment horizon.”
It is no coincidence that major hubs of the petrochemical industry such as Houston, Rotterdam and Antwerp feature prominently in the company's strategic business portfolio. The company’s strategy is centred on organic growth of the existing asset portfolio. “We see significant opportunities for growth in Houston, Antwerp and Rotterdam,” says the CFO. “In particular, there is substantial growth potential at our sites in the US”. A result of the economic benefits that will flow from the exploration of shale gas reserves in North America. One of LBC’s main assets is an inventory of available sites, or its so-called "land bank". “Available land in hub locations is vitally important in our sector. Our site in Bayport is located along Houston's ship channel. We have a large plot of land at our disposal there that we want to use to meet the expected increase in demand for petrochemical and chemical storage in this region."
But the investment philosophy that LBC employs is one of discipline. “Our investments are made to meet customer demand. Expansion investments usually are only made once we have agreed and secured long-term commitments with our customers.”
All of our sites are located port side with direct access to marine logistics. In a number of instances they are in close proximity to our customers’ production facilities. This is an important advantage for them as they are able to reduce significantly their logistics costs.
There is a continuing need for storage at sites that can provide direct access to waterways. We can fulfil this demand perfectly thanks to the large land bank we have at our disposal in the major shipping ports of Houston, Antwerp and Rotterdam. Expanding our land bank to continue to meet this growing demand is a core pillar of our growth strategy. Importantly, this growth strategy is a low-risk growth strategy. And this is important both for LBC's executive team and for our shareholders as it underpins our strategy in the long term by providing the group with stable growth."
"The recent global economic downturn has not impacted the liquid bulk storage sector as heavily as other industries," the CFO says. “Our business has demonstrated a high degree of resilience during the economic downturn”.
With the recent debt refinancing, LBC was able to collect USD 350 million by issuing a bond with a term of 10 years. The group was also able to arrange a credit facility with a consortium of 5 banks of USD 396 million, in various structures and currencies with a term of 7 years. The same consortium also offered a solution to the rate risk with these credit facilities. ING was one of the largest banks in this consortium and played a role in all of the debt instruments, even though they had no banking relationship with LBC at that time.
"By refinancing we were able to diversify our debt financing and extend the term of our corporate debt financing. At the same time we were able to assure investment credits via bank financing in order to finance the next phase of our growth," says the CFO.
Just like LBC, ING Bank is based in the Benelux region, which helped to strengthen the relationship and bring it to a higher level. "Even more important was the fact that we were able to work with a team that understood our business. A team that had a thorough understanding of the dynamics of our business and industry and which genuinely believed in our long-term strategy.”
Does he have any advice for colleagues who are looking to refinance? He lets his experience speak for itself: "Since joining LBC we have maintained open and transparent communication with our lenders and future financiers with regard to our business performance, our financing requirements and our long-term vision and strategy for growth. We took our current financiers and potential new financiers along with us on the LBC journey. This way we could demonstrate a strong track record of performance when it was time to refinance our business. We were able to show our lenders and future financiers that we had effectively achieved what we had set out to do. A clear business strategy, communicating that strategy succinctly and then reporting the positive progress of our performance against the strategic plan helped us to develop the trust and interest of our financiers in our business and win their support for LBC’s growth strategy. Strong relationships with our financiers have been formed based on these principles and foundations.”