Financial close reached for €600m German PPP

The A7 highway project, backed by a grouping including Dutch fund manager DIF, is the first to benefit from the EIB’s project bond initiative in the country.

A consortium comprising the Netherlands’ DIF and German developers Hochtief and KEMNA Bau Andrea has reached a financial close on the German A7 road public-private partnership (PPP).

The project, which involves planning, financing and undertaking an upgrade of the main road link between Denmark and Germany, is budgeted at €600 million. DIF owns 41 percent of the project, with Hochtief and KEMNA holding the remainder.

Long term debt, provided by a bond facility, will be issued by a club of European and US investors.

The project is the first German-based project to benefit from the EIB’s Project Bond Credit Enhancement initiative (PBCE), through which the institution is providing a €90 million subordinated loan (representing about 20 percent of the volume of senior debt) to help bump up the instrument’s credit rating. The bond is rated AAA by Moody's – a 1.5 notch uplift on its original rating. 

The EIB is also an investor in the bond, on the same level as the project’s other bond investors. These include insurers AXA, MassMutual and Sun Life; pension firm Aegon; and German development banks KfW.

The project consists of the extension of a 65 kilometre-long section between the Bordesholm junction in Schleswig-Holstein and the Hamburg Nordwest junction, which will be widened from four to six lanes (with a 500 metre stretch enlarged to eight lanes). It also involves operating and maintaining a 59-kilometre section of the A7 for 30 years. 

The project is availability-based, with DEGES, a state-owned project management institution, acting as the project promoter. Traffic will be maintained during the construction phase, which is due to complete by 2018.

During construction Société Générale and Crédit Agricole will provide a milestone facility. Société Générale also acted as financial adviser to the sponsors and mandated lead arranger on the transaction.