The Florida Department of Transportation (FDOT) and project sponsor ACS reached financial close on the $1.59 billion financing of the I-595 toll road project on 3 March. The financing comprises $207 million in equity from ACS, $607 million of debt from the Federal Highway Administration's TIFIA programme (as well as another $71 million in capitalised interest) and $780 million from a club of 12 banks.

The project is the first PPP deal to close in Florida, the first availability payment-based concession in the US, and cements ACS' strong start in the US PPP market. Despite the list of firsts, the deal had to cope with the closure of the private activity bond market, the withdrawal of several lenders and an equity provider, and continued dislocation in banks' funding markets. It slipped ahead of the troubled Port of Miami Tunnel project, which should have been the state's first, on the way to close.

The I-595 provides a guide to how the private sector will participate in infrastructure markets, even prosper, during a time of massive federal support for states' spending programmes. Of the $1.59 billion in financing, only $255 million is senior debt that is exposed to the concession's operating risk. The bank debt has a 10-year maturity, and breaks down into a $255 million tranche to be repaid with availability payments from FDOT and a $525 million tranche to be repaid with acceptance payments from FDOT for the work's completion.

The $685 million in acceptance payments are a large part of FDOT's obligation, though small next to the $1.3 billion (in real terms) in total availability payments, the size of which indicates that the concession could support additional debt. The public sector did not have to make substantial changes to the concession structure to close it, although it did increase the payments by $2 million to roughly $66 million per year.

ACS, say FDOT and its advisers, deserves much of the credit for bringing the deal to signing. It agreed to assume the risk related some contentious elements – hazardous materials, permit delays, and unforeseen land issues – up to a cap. ACS is responsible for both the operation of the road and its construction, and is providing a guarantee of 40% of the value of the work.

It is difficult to imagine a financial sponsor dealing as effectively with the gyrations in debt markets as ACS did. The road's request for qualifications went out in 2007, after which four consortiums were shortlisted. FDOT issued a request for proposals to this shortlist, and received two back, from ACS and a Babcock & Brown/Bilfinger grouping, whose availability payment number was twice that of ACS. ACS has originally bid alongside Macquarie, but Macquarie pulled out shortly before the final bid went in on 5 September 2008, and stayed on as an adviser to the sponsors.

ACS won the concession in October 2008 and planned to finance the $700 million senior debt requirement through an issue of private activity bonds, which would have benefited from a letter of credit of roughly $150 million from Santander. Like the TIFIA loan, the project was submitted to the US Department of Transportation as a PAB candidate in April 2007 under SEP-15 authorisation, before the preferred bidder was chosen. But the interest payments on the bonds are subject to the alternative minimum tax, and investors with the appetite but not subject to the tax were scarce in November 2008, when RBC and Bank of America sounded out the market about a bond issue.

The sponsor, as one deal participant put it, "turned on a dime" to retool the project for a bank market financing, although it was running a competition between the PABS and a bank group of Santander, BBVA, SG, Calyon, RBC, Lloyds, RBS and Fortis before and after the selection. The last four banks, however, pulled out of the financing – in Fortis' case shortly before financial close, when the vagaries of its proposed merger with BNP Paribas made it too difficult to make a large commitment.

The final bank line-up consisted of Santander, Dexia, SG, and Calyon, as bookrunners, with Dexia as administrative agent and Santander as documentation agent, Banco Popular Español, La Caixa, Caixanova, Caja Madrid, BBVA, Banco de Sabadell, WestLB and National Australia Bank as initial mandated lead arrangers*.

The pricing on the debt starts at 300bp over Libor, stays there for the first five years of the debt's life, and increases to 325bp in the sixth and seventh years, 350bp for the next two years and 400bp in the final year. The debt's market disruption clause makes it a little vulnerable to funding difficulties at a third of the lenders, but its interest rate is hedged for 22.5 years, the same length as the debt's amortization profile.

TIFIA continues to demonstrate its willingness to bend its mandate in support of needy projects. It is limited to financing 33% of the cost of a project's cost, a limit it only kept to by counting the state's predevelopment costs in the total. Its principal will not be repaid until after most of the bank debt has been paid in 2017, and it is subordinated to the bank debt unless the project defaults. The concession's PAB debt was rated A+ (Standard & Poor's), with the benefit of the letter of credit. That rating will have slipped a little under the bank structure, but after construction is complete, and credit markets permitting, ACS will be plotting a refinancing.

The project involves building a 17km section of variable-rate reversible toll road between I-95 and I-75 in Broward County, Florida. FDOT chose an availability payment structure because it wanted to set tolls to minimise congestion rather than maximise revenue. It subcontracts the toll collection to Florida Turnpike, while ACS is responsible for the operation and maintenance of the road. There is no traffic-related element to the concession's revenues.

I-595 Express LLC
Status: Closed 3 March 2009
Size: $1.6 billion
Location: Florida
Description: 17km variable rate reversible toll road, to be operated under a 35-year concession
Concession grantor: Florida Department of Transportation
Equity: $207 million
Sponsor: ACS Development
Debt: $1.387 million
Arrangers: Santander, BBVA, SG, and Calyon, (bookrunners), Banco Popular Español, La Caixa, Caixanova, Caja Madrid, WestLB, National Australia Bank, BBVA, Banco de Sabadell
FDOT advisers: Nossaman (legal), Jeffrey Parker (financial), Reynolds Smith & Hills (engineering), Wilbur Smith (traffic)
Sponsor advisers: Dewey LeBoeuf (legal), Macquarie (financial)
Lender legal adviser: Simpson Thacher
Florida counsel (sponsors and lenders): Hunton & Williams
TIFIA financial adviser: Taylor DeJongh
Insurance advisers: Marsh (lenders), Allied North America (sponsors)
Independent engineer: Scott Wilson

*Arranger titles corrected in this sentence.