Bank of China contributes $425 million to $1 billion syndicated loan for Formosa Ha Tinh Steel Plant Construction Project

BOC contribution to $1 billion syndicated loan for Formosa Ha Tinh Steel Plant Construction Project In 2016, Formosa Ha Tinh (Cayman) Limited — a special purpose vehicle and subsidiary of the Taiwanese conglomerate Formosa Plastics Group that is registered in the Cayman Islands — signed a $2.5 billion syndicated loan agreement with a group of Chinese and non-Chinese lenders for the Formosa Ha Tinh Steel Plant Construction Project.

The loan consisted of a $1.5 billion, 7-year tranche that carried an interest rate of LIBOR plus a 1.58% margin and a $1 billion, 5-year tranche that carried an interest rate of LIBOR plus a 1.4% margin.

Known participants in the $1.5 billion tranche include Bank of Taiwan, DBS, Hua Nan Commercial Bank, Mega International Commercial Bank and Taipei Fubon Bank. Known participants in the $1 billion tranche include Bank of China, Mizuho and Sumitomo Mitsui Banking Corp. Bank of China reportedly contributed $425 million.

The purpose of the project was to construct the Ha Tinh Formosa Plastics Steel Complex in in Kỳ Phương commune, Kỳ Anh district, and Hà Tĩnh province.

A groundbreaking ceremony for the plant took place in December 2, 2012 in the presence of Prime Minister Nguyen Tan Dung. Then in late 2015, the plant outputted the first hot rolled coil manufactured in Vietnam. However, the project encountered a variety of problems and delays.

On March 24, 2015, a 30-meter-high scaffolding section at the project site collapsed, killing 16 construction workers and injuring 27 others.

Then, in June 2016, the complex was found to be discharging cyanide and other pollutants that killed fish along a 130-mile stretch of the Vietnamese coast.

After a Vietnamese government report confirmed that Hung Nghiep Formosa Ha Tinh Steel Limited Company was responsible for the environmental damage, the company agreed to pay $500 million in compensation for discharging water containing chemicals such as phenol, cyanide and iron hydroxides.

Then, on May 29, 2017, the plant restarted (and one of the blast furnaces was put into operation) after its operations were halted in the wake of the disaster. However, one day later (on May 30, 2017), a dust explosion rocked the Ha Tinh Formosa Plastics Steel Complex.

On August 3, 2022, the China Steel Chemical Corporation (CSCC), an investor in the Formosa Ha Tinh Steel Corporation Joint Venture, suspended capital injections, and later voted to cancel their joint venture agreement with Formosa Ha Tinh Steel on December 28, 2022.