Lima’s first municipality-backed public-private
partnership (PPP) toll road project closed despite significant
construction risk and no federal government guarantee.
The Vía Parque Rímac Project reached
agreement with the new Municipalidad Metropolitana
de Lima halfway through closing, which occurred on June
28. The financing package is thought to foreshadow future
Peruvian projects, both in municipal backing and
Financing included a S/217.4 million ($82 million)
credit facility from Banco de Crédito del Perú
and Banco Internacional del Perú (Interbank) alongside a
dual-series note offering valued at S/1.12 billion.
Series A notes totaled S/317 million and were
predominantly sold to local pension funds, while the S/807
million inflation-adjusted Series B notes were purchased
primarily by insurance companies.
Payments will be made to noteholders on a rolling
basis upon the achievement of construction milestones before
maturing in 2037.
"You have to measure the appetite of investors
(insurance companies, pension funds and commercial banks),"
Rubio Leguía Normand partner and arranger’s
counsel Oscar Arrús said.
"That makes it very difficult because you have to
search for potential noteholders and banks that want to give
loans, but at the same time the different sets of debt have
different market standards, thus making intercreditor matters
crucial," he added.
Intercreditor issues were ultimately solved through
the use of a cash flow trust funded by existing and future toll
payments, and overseen by Citigroup. The project adds to
existing infrastructure, so revenue from operating toll roads
will be passed on to the project’s concessionaire,
Línea Amarilla, in approximately one year.
Juan Carlos De Los, partner at Estudio Echecopar,
advised Linea Amarilla and its parent sponsor, Invepar. He said
the cash flow trust has a sophisticated waterfall and accounts
"It receives the disbursement of the loans and
notes, as well as the capital contributions from sponsors, and
manages the accounts and the money throughout the construction
process," De Los Heros said. "During the operation of the
project, it will receive all of the tolls in order to pay the
debt service and operation expenses and costs."
The concession was acquired by Invepar from its
original sponsor, Constructora OAS, in March, so investors had
to be convinced of the project’s security.
Línea Amarilla obtained a $571.2 million
loan from OAS Investments along with an all-cash equity
contribution of $88 million from Constructora OAS in December
2010. The project was refinanced under Invepar in accordance
with the above terms.
Concession rights to tolls serves as security to
both lenders and noteholders, and completion of the project and
realisation of toll road concessions is ensured by a
Línea Amarilla commitment to pay up to S/949.1 million
Deal counsel emphasised the lack of a federal
guarantee in this project as the beginning of a trend
– more municipal involvement but greater emphasis on
giving investors security in absence of federal backing.
Referring to the lack of a federal guarantee, De
Los Heros said: "That required a different risk assessment if
you compare it to similar transactions in the country."
"As a brownfield project, there is already
infrastructure in place and tolls being charged. The creditors
will receive the tolls even if for any reason the project is
not finalised," Oscar Trelles de Belaunde, another attorney
with Estudio Echecopar, said. "The creditors will receive
interest payments until completion and thereafter they will
receive principal and interest payments."
Linea Amarilla and Invepar were
represented by Estudio Echecopar in Peru and Davis Polk &
Wardell in New York. BNP Paribas, as arranger, was counseled by
Rubio Leguía Normand in Peru and Mayer Brown in New
York. Miranda & Amado and SNR Denton acted for Citibank Del
Perú & Citibank.