Australian banks participate in 10-year debt facility on Melbourne road PPP refinancing

Increased competition for the Peninsula Link deal drove the country’s four big banks to agree 10-year loans, pushing beyond their preferred five-year terms.

Plenary Group has completed a refinancing of the Peninsula Link road public-private partnership in Victoria worth A$646 million ($458 million; €398 million), which enticed Australia’s top four banks to go beyond their preferred five-year terms and participate in a 10-year debt tranche.

Under the agreement, debt financing for Peninsula Link will now be split into two tranches with around 50 percent of five-year debt and 50 percent of 10-year debt, according to a source close to the process.

Infrastructure Investor understands the 10-year debt tranche includes financing from Australia’s four major banks in an unusual move, as banks in the country have been reluctant to extend facilities beyond five years in most cases.

Increased competition for this deal drove this change, as the refinancing was around four times oversubscribed, the source said.

Plenary Group said in a statement all eight existing banks that had participated in the initial PPP – including ANZ, Commonwealth Bank of Australia, National Australia Bank and Westpac, and four international banks – participated in the refinancing, achieving what Plenary called a “compelling outcome”.

The four international banks are Bank of Communications, MUFG, SMBC, and SMTB, Infrastructure Investor understands.

Plenary Group head of origination Paul Crowe said in a statement that the pricing and tenor achieved were “highly competitive”.

AMP Capital and Whitehelm Capital represent the equity investors in Peninsula Link, a 27-kilometre toll-free road between Carrum Downs and Mount Martha in southeast Melbourne.

Plenary Group took over asset management of Peninsula Link in 2016 on behalf of Southern Way, a consortium comprising Abigroup, Lendlease Infrastructure Services and Bilfinger Project Investments Australia.

In 2010, Southern Way was awarded the initial PPP contract to design, build, finance, operate and maintain the road for 25 years. The road opened to traffic in 2013.

Plenary Group declined to comment on the financial terms of the refinancing.