The R3.7 billion ($498 million) refinancing of the Bakwena Platinum Corridor Toll road is the largest refinancing of an infrastructure project to date in South Africa and despite the harsh debt market conditions in 2009 achieved significant refinancing gains for its sponsors.

Bakwena Platinum Corridor Concessionaire (Pty) Limited is owner and operator of the 30-year N1\N4 toll concession which first financed in 2001. It is responsible for the ongoing operations, maintenance and upgrading of 385 kilometres of toll road between Pretoria, and Bela Bela on the N1 and between Pretoria and the Botswana border on the N4.

The original project financing comprised a R2.045 billion debt package, at the time the largest financing of its kind in South Africa, split between R1.193 billion in bank debt, arranged by Nedcor, and a R852 million CPI-linked bond issue (also a first for the market) arranged by Investec. The bank debt was made up of two senior tranches: a R663 million bank term loan and a R350 million EIB term loan, plus a R180 million sub-debt tranche. Tenor across the whole package was 20 years with the margin just above 200bp.

Lead arranged by Nedbank, the refinancing extends the original tenor by 12 years to almost the full length of the 30 year concession. The new deal comprises four different tranches of senior debt, which differ in terms of interest and capital grace periods as well as being split between consumer price index linked debt, vanilla senior term debt and a guarantee facility.

The facilities comprise a 20-year senior term loan of R1.4 billion provided equally by Nedbank and ABSA; a 20 year sculpted term loan of R650 million solely provided by Nedbank; a 20-year CPI term loan of R1.5 billion provided by Nedbank (R1 billion) and Absa (R500 million); and an unsecured debt service reserve guarantee facility of R150 million solely provided by Nedbank.

As Bakwena's toll revenue increases are linked to the consumer price index, a portion of the funding has again been linked to CPI debt to create a partial hedge in the borrowing costs to adverse increases in the relevant index.

The sculpted debt's repayment profile has also been structured to optimise project cashflows and maximise the refinancing gain, while the unsecured debt service reserve guarantee facility has reduced the negative carry usually associated with fully funded debt service reserve accounts. The package was also structured with a series of capital repayments having similar characteristics to zero coupon bonds (ZCB) to meet the needs of the institutional investors.

Bakwena Platinum Corridor Toll Road
Status: Financial close 15 June 2009
Description: Toll road refinancing
Sponsors: Infrastructure Concessions South Africa; South African Infrastructure Fund; Public Investment Commissioner; Murray & Roberts; Concor Holdings; WBHO Construction; Old Mutual Life Assurance Company; The Royal Bafokeng Nation
Financial adviser: Macquarie First South
Mandated lead arranger: Nedbank Capital
Lead arranger: Absa Bank
Sponsor legal counsel: Webber Wentzel
Lender legal counsel: Bell Dewar
Technical consultancy: Arcus Gibb