In a key deal supporting Mexico’s exploration of its offshore energy reserves, Milbank, Tweed, Hadley & McCloy has represented an international lender group in arranging a $547 million loan for the financing of a new-generation deepwater drilling rig to be used for oil exploration in the Gulf of Mexico.

The Korean-built drillship – one of the biggest in the world –is being developed for diversified energy and construction company Grupo R and will be leased by Mexico’s state-owned petroleum company Pemex (Petróleos Mexicanos) expressly for drilling in Mexican waters. The vessel will be christened La Muralla IV and has capacity to operate in water depths of 10,000 feet and drill up to 35,000 feet, approximately seven miles below the surface.

Financing for the rig is being led by Mizuho Corporate Bank, Ltd. and WestLB AG, with an additional tranche provided by the Korea Export-Import Bank. There is an additional commercial lender tranche that benefits from K-Sure insurance coverage provided by the Korea Trade Insurance Corporation. Other financial institutions involved were the Bank of Communication New York, Korea Development Bank, Santander, Grupo Financiero, BBVA, Banco National de Mexico, HSH Nordbank and Scotiabank.

The financing is additionally noteworthy as it reportedly is the final transaction recorded by Dusseldorf-based WestLB. The 180-year-old German bank had a U.S. financing arm since 1974 but officially ceased operations at the end of this past June, and will be reorganized as Portigon Financial Services; as reported in Project Finance International, the bank will no longer transact project finance deals.

Milbank’s work on La Muralla IV follows several similar large financings for deepwater drillships in Brazil. Earlier this year the firm represented international banks in funding the purchase of two rigs built by Samsung Heavy Industries to be leased to Brazil’s Petrobras. Financing for the two drillships was approximately $1.4 billion.

“Pemex has said that it regards deepwater drilling an increasingly important part of its long-term strategy for developing new reserves, and that it is willing to invest in the resources and technology to make that happen,” said Milbank project finance partner Dan Bartfeld, who led the financing on behalf of the lender group and who previously advised lenders in the Petrobras drillship deals. “We’re pleased to have worked with KEXIM and a group of major financial institutions in structuring a highly sought after project financing in Mexico – in this market it is very unusual to be oversubscribed, and Grupo R managed to achieve that with this financing.”

Milbank project finance senior associate Roland Estevez added, “This transaction is another illustration of our capability in bringing together public and private sector sources of capital to finance important, big-ticket energy projects in Latin America. One of the highlights of this deal is the role of KEXIM and K-Sure in support of this transaction – it represents a welcome vote of confidence by some of Asia’s leading institutions in the Mexico offshore energy sector.”

Offshore