Denver’s transit PPP reaches financial close

At financial close, Macquarie sold down its stake in the project’s concessionaire to John Laing and a Lloyds subsidiary. The concessionaire also issued $400m of private activity bonds, which will be used to finance the construction of a 22.8 mile commuter rail line to Denver International Airport.

Denver Transit Partners has reached financial close on the first phase of its Eagle public-private partnership in Denver, completing a deal that brought new equity owners into the capital structure and raised nearly $400 million from bond investors.

At the financial close, UK-based infrastructure developer John Laing and Uberior, the infrastructure investments arm of Lloyds Banking Group, each bought out 45 percent of the equity interest in Denver Transit Partners from Macquarie Capital. Financial terms of the transactions was not disclosed.

At Eagle's awarding in June, Macquarie owned 90 percent of the equity in the winning concession company for the project, with engineering and construction firm Fluor owning the remaining 10 percent.

Laing said in a press release that the project’s financial close marked its official entry in the US market for public-private partnerships (PPPs).

All together, Laing, Uberior and Fluor will now be on the hook for a $54.2 million equity contribution toward the two phases of the Eagle PPP. These involve building a new 22.8 mile “East Corridor” line connecting downtown Denver with its international airport in the east (phase one) and an 11.2 mile “Gold Line” connecting the city with its western suburbs (phase two).

Letters of credit for the equity contribution were provided as of financial close, according to a bond offering document for the deal. The contribution won’t be drawn down until 2013, according to the document.

In the meanwhile, Denver Transit Partners will use proceeds from a $397.8 million bond sale to begin construction on the East Corridor. The offering was structured as a private activity bond sale – a form of tax-exempt municipal debt that can be applied toward private sector-sponsored projects.

The Baa3-rated bonds will pay interest between 5.25 percent and 6 percent, depending on their maturity, and yield between 4.85 percent and 5.6 percent, according to the bond offering documents.

With the closing of the bond financing, Denver officials gave Denver Transit Partners the ok to begin construction on the East Corridor, which is scheduled for completion in January 2016.

Approximately $580 million of construction payments will also be used to finance the building of the East Corridor. Denver Transit Partners will receive these payments periodically over the six years from the Regional Transportation District (RTD) of Denver, the project sponsor.

RTD plans to bankroll a substantial portion of the construction payments through a $1 billion grant it hopes to receive from the Federal Transit Administration next year.

Absent the grant, RTD will still be able to move forward with the East Corridor. But construction of the Gold Line is dependent on receipt of the grant, RTD said in a statement.

A groundbreaking ceremony for the East Corridor is scheduled for 26 August, RTD said.

Bank of America Merrill Lynch and Barclays acted as the underwriters for the private activity bond offering.