2011: Diversity, depth and drama

NO ONE’S PRETENDING we’re back in boom times, but those involved in financing infrastructure projects have not been sitting on their hands. Indeed, 2011 has demonstrated that when volatility rocks the global economy, some outstanding innovations can result. We ran the rule over financings completed so far this year and describe six of the most notable examples below.

A BLOW-AWAY BOND SUCCESS

A Canadian hospital PPP tapped the bond markets and came away with the largest-ever financing of its type

Name of deal: Centre Hospitalier de L’Université de Montréal (CHUM)
Location: Canada
Financial close: June 2011
Deal size: C$2 billion (€1.4 billion; $2.1 billion)
Financiers include: Fiera-Axium (equity), Innisfree (equity), Meridiam Infrastructure (equity), RBC Capital Markets (sole underwriter of bonds)

What makes it so special? 
Never before had such a large bond offering been made in support of a Canadian public-private partnership (PPP). The Collectif Santé Montréal consortium – comprising Laing O’Rourke, Innisfree, Dalkia Canada and OHL – raised C$1.37 billion through the sale of secured bonds, with the consortium members committing C$180 million of their own capital and subordinated loans.

There had been some scepticism about the project, given, for example, a protracted construction period and the location of the hospital in a congested urban area close to an existing hospital, another major construction project and a subway line.

Despite the perceived downsides, rating’s agency DBRS rated the bonds BBB+ and cited the low credit risk for the project’s counterparties, CHUM and the province of Quebec.

FOR WHOM THE ROAD TOLLS

Dubai raised money from a highly innovative monetisation of future revenues

Name of deal: Dubai toll road monetisation
Location: Dubai
Financial close: July 2011
Deal size: $800 million
Financiers include: Commercial Bank of Dubai, Dubai Islamic Bank, Emirates NBD, Citi (mandated lead arrangers)

What makes it so special? 
Two reasons. Firstly, this was arguably the most innovative fi nancing seen in an infrastructure context in 2011 – eventually raising $800 million from the monetisation of future revenues to be raised from the Gulf emirate’s Salik toll road collection system.

Second, the syndication of the deal included both conventional and Islamic tranches. In a recent report, rating’s agency Standard & Poor’s tipped Islamic fi nancing to play a crucial role in financing infrastructure development henceforth.

This transaction is included here, despite not being an infrastructure project per se. The emirate’s Roads and Transport Authority said the proceeds would be used to help pay for future infrastructure projects.

THE RE-BIRTH OF SYNDICATION

A healthy projects pipeline relies on a healthy syndication market – so this PFI deal was lauded for

Name of deal: SITA South Tyne & Wear waste PFI
Location: UK
Financial close: August 2011
Deal size: £236 million (€269 million; $369 million)
Financiers include: I-Environment Investments (equity), BBVA/Credit Agricole/Natixis (bookrunners & lead arrangers), KfW IPEX-Bank/Mizuho Corporate Bank/Sumitomo Mitsui Banking Corporation Europe (syndicate participants)

What makes it so special?
“If the syndications market continues to be closed, as it is today, it [will be] impossible for us to see a big number of large projects coming to fruition”. This is what Juan Bejar, chief executive of Spanish developer Global Via, told Infrastructure Investor in October 2010.

By the middle of this year, a syndication market that had been dormant since the global collapse of 2008 was at last beginning to show signs of a pick-up – and the SITA waste PFI was indicative of the trend.

Acting as bookrunners and mandated lead arrangers, BBVA, Credit Agricole and Natixis successfully closed an oversubscribed syndication of £236 million of senior secured credit facilities – as a result of which, KfW IPEX-Bank, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation Europe joined the transaction.

GUARANTEED SUCCESS

It took a year of negotiations to factor in government guarantees and traffic risk to close the world’s largest railway concession

Name of deal: Tours-Bordeaux high-speed rail line
Financial close: June 2011
Size: €7.8 billion
Financiers include: BBVA, BNP Paribas, Credit Agricole, Dexia, European Investment Bank, Mediobanca, Santander, Societe Generale, SMBC and Unicredit (debt); Vinci, CDC Infrastructure, Meridiam, AXA Private Equity (equity). Public funding for the project amounted to €4 billion.

What makes it so special?
Size, for starters, but mainly the fact that it was the first (and perhaps last) French project to make use of the government’s much vaunted debt guarantee, implemented in response to the 2008 outbreak of the global financial crisis. Implementing the intricacies of the guarantee – including obtaining state-aid clearance from Brussels – took time, but reaped dividends. Just compare the 145 to 175 basis points on the 27-year, €1.06 billion of guaranteed debt with the 300 to 430 basis points being charged on the 27-year, €612 million unsecured loan.

The political will and backroom dealing necessary to secure some €4 billion in central and local government funding should also not be underestimated, as Tours-Bordeaux spent a fair amount of time bogged down in local power-politics.

DEBT FREE, HIGH RISK

Institutional investors acquired a 74.9% stake in Germany’s fourth-largest electricity grid. One day later came a regulatory hammer-blow

Name of deal: Amprion
Financial close: July 2011
Size: €1.3 billion
Financiers include: Commerz Real, Munich Re, ERGO, MEAG, Swisslife and Talanx (equity)

What makes it so special?
Property fund manager Commerz Real led the deal and dubbed the acquisition “unprecedented in Germany in terms of its form and scope”. Commerz created a custom-built fund allowing institutional investors to buy into Amprion. Like any debt free deal, the investors are fully exposed to any bumps along the road. The German regulator’s announcement – one day after the deal closed – that it might lower allowed returns in the sector by 1 percent was less a bump, more an earthquake.