Date post: | 02-Jan-2016 |
Category: |
Documents |
Upload: | ava-petersen |
View: | 21 times |
Download: | 1 times |
Overview of the reasons why there is a change in how transportation are
financed.
Chicago, May 14, 2007
Pedro A. Losada,
Head of North American Project Finance
6 October 2005
CINTRA – www.cintra.es
Transportation Infrastructure Developer Value creation through long term investments on toll roads
Since 1968 & for the long term – Bilbao Behobia
Listed in the Madrid (Spain) Stock Exchange Market cap $ 9 bn 62% of Cintra is held by Ferrovial (www.ferrovial.com)
20 road concessions in actual portfolio 2,500 miles Asset value $12 bn; equity investment $2.3 bn Canada, US, Spain, Chile, Ireland, Portugal and Greece 62% average controlling stake Remaining concession terms ranging from 11 to 99 years (weighted average 73 yrs)
Skilled project finance team $12 bn in non-recourse private debt structured since 1987 Wrapped and unwrapped bonds; bridge, mini-perm and long term bank loans
6 October 2005
407 ETR
1
Chicago Skyway
2
TTC-35SH 130 5&6
3
Cintra in North America
First privatization of an infrastructure asset in the United States – USD 1.8 bn
First time a project sponsor also becomes a strategic partner for a State
SH 130 an investment around $1.3 bn
Indiana Toll Road
4
Second privatization of an infrastructure asset in the United States – USD 3.8 bn
Biggest private investment effort ever made in the highway industry (CAD 4 bn) (until the ITR deal in January 06)
6 October 2005
Financing alternatives: possibilities
All financing alternatives available in the market have to be considered
5 main financing alternatives:
Private Activity Bonds
Wrapped (by monolines) 144A bonds
Unwrapped bonds
Miniperm bank loan (5-10 years bullet or quasi-bullet)
Long term bank loan (25-30 years sculpted amortizing)
Whenever possible, access to Federal Funding Programs
TIFIA
All these alternatives implies shareholder’ s equity injection
Detailed analysis required on a case by case basis
seeking optimal financing conditions tailored for each project
6 October 2005
Financing alternatives: Bank vs Bonds
Main differences between bond and bank alternatives:
Tax-exempt bonds have and additional disadvantage for private developers: not being shareholders, makes not straightforward to them to capture all cash-flows and upsides.
Tax-exemptBond
WrappedBond
BankLoan
Documentation Complex Complex Simple
Rating required Yes Yes No
Negative carry Yes Yes No
Cost Lower Medium Higher
Maximum Tenor 40 yrs 40 yrs 30 yrs
Flexibility (amendments) High Medium Low
6 October 2005
Financing alternatives: Cintra’s experience
Wrapped bonds: Autopista del Maipo (US-144A & Chile); Talca-Chillán (Chile); Collipulli-Temuco (Chile); Euroscut Algarve (Portugal): Chicago Skyway (US).
Unwrapped bonds: 407-ETR (Canada)
Miniperm bank loan: Chicago Skyway (US); Radial 4 (Spain); Ocaña-La Roda (Spain); Ausol (Spain).
Long term bank loan: Eurolink (Ireland); Temuco-RioBueno (Chile); Norte Litoral (Portugal); M-45 (Spain).
In addition, Cintra team has experience in financing airports and car parks (among others: Sydney Airport, Bristol Airport, Belfast City Airport).
6 October 2005
Main reasons of the change
High Market’s liquidity
Competitive financial covenants
Aggressive financial structures
Non breakage costs and no negative carry (Greenfields)
Quick transaction's execution
Reserves requirements
Refinancing risk
Access to new instruments available in the marketplace
Concession Term
Competitive process (Ag. Rating)
6 October 2005
Case study: Chicago Skyway
ChicagoSkyway
First existing toll road privatized in the US
99-yr concession sold for $1.83 bn
7.8 miles in length, 3 lanes in both directions
Connects to Indiana East-West Toll Road and Dan Ryan Expressway
Current tolls $2.5 per car, $1.20 per truck axle – no change since 1993
Mostly cash-only tolling
Average Passenger Vehicles per day: 50,000
6 October 2005
Case study: Chicago Skyway
3 alternatives considered for structuring the financing:
tax-exempt bonds (using a non-profit vehicle),
wrapped bonds and
miniperm bank loan.
Up-front payment finance structured with a 9-year bank loan underwritten by BBVA, Calyon, Depfa and Santander:
Tranche A (acquisition price and transaction costs): $ 1,000 M;
Tranche B (liquidity facility): $ 110 M;
Tranche C (capex) of $ 80 M.
+ $ 882 M Shareholders Equity
Key driver for the bank alternative: payment dateline
easy documentation and no need of rating agencies for the bank loan
Considering the possibility of refinancing the bank loan with a wrapped bond
Will probably allow increased leverage (reducing private equity amount)
6 October 2005
Case study: Chicago Skyway
Refinancing the Bank Loan trough a taxable Bond issue:
Rule 144A/Regulation S and Institutional “Acredited Investors”
Monoline wrapped by FSA
Joint Bookrunners Citigroup and Goldman Sachs
AAA Rating by S&P and Aaa by Moody’s.
US $ 1.4 Bn Bond Issue in the US market:
Serie A, US $ 439 M, 12 years Maturity of Current interest Bonds (Bullet)
Serie B, US $ 961 M, 21 years maturity of Capital Accretion Bonds (capital interest);
Interest Rate fully swapped until maturity
US $ 150M Subordinated Debt. A 30 years maturity loan underwrite by BBVA, CALYON and SCH
With this refinancing the shareholders recover 44% of the initial investment