The refinancing of the A1/A6 Diemen-Almere Havendreef highway PPP in the Netherlands may signal a wave of Dutch infrastructure refinancings to come.

The deal, which closed on 31 May 2016, allowed the A1/A6 project company stakeholders—a group led by fund manager DIF—to reap significant borrowing cost savings, a feat sponsors of other Dutch infrastructure projects may be keen to emulate.  

Pricing discount

Bank lending liquidity has increased significantly since the original financing for the A1/A6 reached financial close in February 2013, sending margins on commercial debt for infrastructure projects tumbling. As a result, the sponsors for this road expansion will now pay an initial price of about 140bp over Euribor on their senior long-term debt, a rate that will increase to around 175bp above Euribor over the duration of the term, IJGlobal understands.

Although the new price is not as low as the margins some project sponsors agreed during the lending-rate trough of late 2015—such as the initial rate of 120bp over Euribor paid on the Dutch Ijmuiden Sea Lock project—it still represents a sharp discount on the pricing paid on the original financing. The debt on that deal started at 240bp over Euribor and has now risen to about 270bp over Euribor.

Sponsors of other infrastructure projects the country may also look to refinance now, particularly ones which were signed during late 2012 or early 2013 when average margins were much higher, one source suggested. A possible upcoming refinancing in the Benelux region is the €200 million ($226 million) North-South Kempen road in neighbouring Belgium, which closed in October 2011, said another source.

Timing it right

The sponsors of the A1/A6—a group known as SAAone comprising DIF (43%), Hochtief (20%), VolkerWessels (20%) and Boskalis (17%)—were one of the first in Europe to close on long-term bank debt after the full effects of economic crisis of 2008-2009 had been felt in the infrastructure market, a benefit that “came at a price,” as one source explained.

In fact, limited bank lending liquidity meant the other consortia that originally bid for the A1/A6 were unable to present traditional bank debt solutions, having to resort to institutional debt solutions created by Dutch banks, such as ING’s PEBBLE and NIBC’s Commute. 

To be sure, the circumstances surrounding the development of the PPP industry in the Netherlands mean timing has been a key issue. Although a number of infrastructure PPP projects were developed in the country in the 90s, the use of this structure remained relatively sporadic until the 2000s, particularly in comparison to the UK, which led the way with this type of transaction. And with the Netherlands’ relatively late arrival on the scene came the unfortunate reality of a drying up of bank liquidity and the resulting spike in borrowing costs produced by the economic crisis of 2008-2009, a development that coincided with the maturing of the PPP industry in the country.

Many project sponsors weighed down by high borrowing costs will likely fail to convince their lenders to give them similar cuts, noted another source. Ambiguities in contacts mean it is difficult to work out how to share the savings, he said. One example of a failed attempt to seek refinancing is the high-speed train link connecting Amsterdam to Brussels at speeds of up to 250kph which has been mired in technical difficulties. The sponsors for this project unsuccessfully attempted to agree a refinancing for the project last year.

The fact that the A1/A6 road expansion is still under construction made it even more difficult to refinance. It means greater risk for the lenders, although most of the more complicated work is now complete and construction is on track to be finished as planned in 2020.

But the construction process hasn’t been easy. Along the way, contractors faced flooding around one of the bridge structures, one insider revealed. But despite this construction is still on schedule, he said.

Debt details

Not all of the incumbent commercial lenders on the project were keen to provide a refinancing, and some (SMBC, Helaba and UniCredit) dropped out altogether. Of the original eight, only MUFG, Credit Agricole, NordLB, KfW and LBBW have remained, with all but one picking up the slack of debt the others would not provide. Out of these five, MUFG took the largest increase, one source said.

Senior long-term debt provided by commercial banks for the refinancing amounts to about €198 million, maturing in 2040. As well as the senior long-term debt, the project is also receiving a €256 million loan from the European Investment Bank. It has also agreed for a €200 million loan to be repaid when operations start and a €73 million equity bridge loan.

The €727 million project comprises work on 18km of the A1 Muiderberg-Diemen road and the A6 Muiderberg-Almere Buiten road, including realignment and widening of the A1 from 2x3 lanes to 2x5 between Diemen and Muiderberg junctions. It is a part of the Schiphol airport-Amsterdam-Almere (SAA) expansion of the A1 and A6 highways. In total, five sections totalling 63km will be in operation to improve access and traffic flow.

The work will be carried out under a design, build, finance and maintain contract, with a term of 30 years.