A club of 13 banks closed the C$1.2 billion ($1.1 billion) debt financing for the A30 PPP road deal in Quebec on Friday 26 September 2008. The financing bypassed a terrible syndication market by assembling a club upfront, using a generous pricing flex, and invoking strong relationship pulls. The deal closed before the credit crunch's latest, most gruesome, phase arrived, but the combination of tweaks is likely to apply to any deals that close  in the future.

The project's sponsors are Acciona and ACS/Iridium, supported by Arup, DJL Construction, and Verreault. The consortium mandated Banesto, BBVA, La Caixa and Caja Madrid, ICO and RBC as lead arrangers and bookrunners in June 2008. BES, Scotia, joined next, and Banco Popular Español, Bosic (HBOS' Canadian arm), DekaBank, HVB, and Société Générale then joined the financing before financial close, with smaller commitments. All 13 banks share mandated lead arranger status. The financing will remain a club deal, and will not be put out to general syndication, at least for the foreseeable future.

The facility is divided into two tranches, a C$832 million term loan, which has a 30-year maturity, and a C$290 million, six-year revolving facility. Some of the banks are also believed to be providing an equity bridge loan, for until the availability and milestone payments begin.

Margin on the term loan starts at a little over 170bp over CDOR, and rises to roughly 225bp over the life of the debt. The pricing has been significantly flexed, and increased from a mooted 125bp starting point, since the deal's inception in June 2008. The pricing took a while to settle, since banks submitted wildly varying bids in the period when the deal was awarded. As the initial arrangers gradually broadened the club, pricing drifted up to the level of the more recent arrivals. Each bank took between C$60 million and C$90 million, with the Spanish banks and RBC taking the higher tickets.

The deal is the second road PPP in the province, following Macquarie's A25 concession, which closed in 2007. Though the earlier deal also closed under trying circumstances in the credit markets, the increased pricing on the A30 asset reflects the worsened conditions. The C$270 million debt for the A25 was lead arranged by Société Générale, and carried a margin of 125bp over CDOR. A number of the same banks participated in both deals.

The concession's revenues are split roughly 80/20 between availability payments and toll revenues (with the traffic component at 14% in the first year, rising to 30% over the life of the debt), and sources close to the transactions say that the financing has less traffic risk than the A25. The A25 deal takes around 40% of its revenues from tolls, with 60% coming from availability and milestone payments from the province. But the A25, located close to the heart of Quebec's commercial capital, Montreal, has a more certain traffic outlook.

The concessionaire will receive around half of the construction costs back from the province in milestone payments during the construction phase, with the remainder coming during ramp-up. Once the road is in operation, the availability payments increase over time, with minimal payments in the first few years of operation. The consortium submitted a bid for the lowest quarterly availability payment requirement, and beat competition from SNC Lavalin- and Macquarie-led consortiums.

The concession covers 35km of existing highway on the A30, and a new 42km greenfield extension creating a bypass to the south of Montréal. The A30 will connect with Autoroutes 10, 15, 20, 30, 540 and 40, linking the Montréal area with the Montérégie region, Ontario and the United States. The construction phase is expected to be four years.

The existing road is the eastern section of the A30, currently under construction by the provincial government. This section does not connect to the local roads network, and includes a 13km, four-lane highway which runs south of the Candiac, Delson, and Saint-Constant areas. The eastern section begins at the existing part of the A30 in Châteauguay, and extends to the Jean-Leman interchange in Candiac.

The construction phase comprises two stages. The 35km western section runs between Châteauguay and Vaudreuil-Dorion, and the consortium will construct an additional 7km section to connect the road to Salaberry-de-Valleyfield.

The concessionaire will be permitted by the province to raise tolls to between a minimum and maximum range, according to inflation. The minimum and maximum rates are presently set at C$0.30 and C$0.70, depending on vehicle size, and will be increased to $0.45 and $1.05 at the start of operation, to reflect inflation. Both electronic and cash tolling will be available.

The procurement process was almost two years; the request for qualifications was issued in November 2006, with a shortlist of three of the four respondents announced in February 2007. However, the request for proposals was not issued until June 2007, and the preferred bidder selected a year later in June 2008. In the interim months, the province closed the A25 deal.

The delays in the procurement process, and the heavily flexed pricing, are all indicative of the pressures in the Canadian and international debt markets. Though bankers haver touted infrastructure as a haven from the credit markets' turbulence, long-term concessions and long-maturity financings are still vulnerable to lenders' liquidity restrictions. At least one member of the club – HBOS – has skirted failure, and several other European banks that were active in Canada have had to restructure.

The likely winners, in Canada, as in elsewhere, are Spanish. Not only are the Spanish construction companies much more desirable clients for banks than infrastructure funds, but Spanish banks, thanks to a stringent regulatory regime.

Nouvelle Autoroute 30 SENC
Status: Closed September 2008
Size: C$1.5 billion
Location: Quebec, Canada
Description: 35-year concession of Autoroute 30
Concession awarder: Quebec Ministry of Transport
Province's adviser: Partenariats Public-Privé du Québec
Sponsors: Acciona, ACS/Iridium
Debt: C$1.2 billion term loan and revolving credit facility
Maturity: 30 years
Mandated lead arrangers: Banesto, BBVA, La Caixa, Caja Madrid, ICO, RBC, BES, Scotia, Banco Popular Español, Bosic (HBOS' Canadian arm), DekaBank, HVB,  Société Générale
Lender legal: Ogilvy Renault
Sponsor legal: Gowling Lafleur Henderson
Financial adviser to sponsors: RBC