EIB credit enhancement key to A8 refinancing

The bank debuted its senior debt credit enhancement facility to help mitigate traffic risk for the brownfield road and clinch €400m of long-term bank and bond debt.

The first-time use of a European Investment Bank (EIB) credit enhancement facility was crucial to securing €400 million of long-term bank and bond debt for Germany’s A8 motorway project.

The bank has deployed its fully funded senior credit enhancement (SDCE-F) instrument – amounting to just below €70 million – to help catalyse about €135 million of senior bank debt and a €70 million senior bond facility, funded equally by La Banque Postale Asset Management (LPBM) and MEAG. In addition, the EIB is also lending over €130 million of senior debt to the project. KfW Ipex-Bank, Nord LB, SEB and Société Générale were the bank lenders on the deal.

SDCE-F acts as a subordinated debt loan equivalent to the funded version of the project bond credit enhancement mechanism, the EIB explained. The overall maturity of the debt package, which replaces the original 2011 financing for the 30-year motorway widening PPP, stands at 23 years.

Although the A8 is a brownfield asset, it still carries traffic risk, with heavy vehicles paying tolls along the road. The EIB’s SDCE-F – and overall support – was key to help mitigate that risk, a source close to the deal said. The source added that the cost of the EIB’s credit enhancement facility was easily offset by the overall cost savings it netted.

Now that the credit enhancement facility has been successfully debuted, the EIB said it can be used to help fund other projects with construction and operational risks, like traffic or merchant risk. The A355 Western Strasbourg Bypass concession, a greenfield project awarded to Vinci in February, could be next in line for SDCE-F, the source suggested.

The A8 links Ulm and Augsburg, in Germany, and opened to traffic last September after a four-year construction period. Strabag, Hochtief and Ed. Zublin are the project’s sponsors.