Autopista del Maipo: Off the shelf

Designed to meet the costs of additional works on the Autopista del Maipo toll road – the price for project sponsor Cintra opting into the Chilean government's risk-sharing mecanismo de distribución de ingresos (MDI) programme – and the refinancing of amortisation payments on the original concession financing, the Autopista del Maipo refinancing set a number of precedents in the Chilean toll road market.

Not only was the deal the first toll road to adopt MDI, the MBIA-wrapped $175 million (UF6 million – unidades de fomento, an inflation-linked version of the peso) local issue came in at an all time low for the Chilean infrastructure market – 29bp over the Chilean long bond (BTU).

Originally financed in 2001 in a $421 million issue in the US 144A market, the fixed length concession was exposed to some indirect traffic risk (despite minimum revenue guarantees which were not enough to ensure payment of the notes on time) in an under-performing Chilean economy. Consequently, Cintra began negotiations in 2002 with the Chilean Ministerio de Obras Publicas (MOP) to opt into the new MDI regime.

Under MDI, concessionaires can purchase guaranteed growth rates in traffic revenue from the MOP. The MDI allows sponsors to extend concessions to make up for shortfalls in projected traffic growth. The revenue deficit in any given year is carried forward to future years together with interest at 9.5% designed to reflect the sponsor's cost of capital. If at the end of the concession's original term all deficits and interest have not been met, the concession is simply extended until operating income equal to the shortfall has been earned.

The MOP has guaranteed traffic growth at 5% on Maipo until 2024 – the end date of the original concession. If concession extensions and tariff increases do not make up for any guaranteed revenue shortfalls by 2033 the MOP makes up the difference in cash and ends the concession.
The price for MDI is around $60 million in additional public works – Cintra is to build a sewage and wastewater drainage system along the route of some of the road – payable in kind and dictated by the MOP.

Consequently, Cintra needed to refinance to fund construction of the public works demanded by MDI, refinance to fund the amortisation payments on the original financing that existing traffic revenues were unlikely to meet until such time as the MDI mechanism made good the shortfall, and create a buffer for any exceptional liquidity needs.

The refinancing takes the form of a $450 million shelf registration in the local market – the first use of such a structure in the Chilean project market – and a $60 million standby facility from ABN Amro.

Of the $450 million, around UF6 million ($175 million) were placed by BBVA immediately. The 19-year bonds have a bullet repayment profile, although principal is payable in three instalments in the three years following maturity. Despite the initial unfamiliarity of investors (and regulators) both with the MDI and the concept of the shelf, the deal was 12 times oversubscribed – the initial face value of the issue is UF5.8 million.

Bonds can be drawn down at any time during the 30-year life of the shelf and terms of each tranche negotiated at time of issuance. MBIA is committed to insure all bonds throughout the life of the concession.

The reason for the shelf registration, aside from the perennial problem of avoiding a negative carry on the proceeds, is that the full $450 million shelf will not, under the base case, be required. These bonds will only be required if, under extremely poor traffic conditions, the project company cannot meet interest and principal payments on the existing debt.

The minimum size of any future issue is around UF1.5 million. Therefore, to make payments in the period it takes for the potential bond issue to reach the ideal size, or to tide the borrower over a choppy period in the bond markets, the deal also features a standby liquidity facility.

This facility, provided by bookrunner ABN Amro, has an initial seven-year tenor, and will be automatically renewed provided the credit ratings of both MBIA and ABN Amro stay at AA.
Autopista del Maipo is not a refinancing in the traditional sense. The original 144A bonds remain in place, with MBIA taking the role of agent, but the new bonds rank alongside the old issue, requiring the lender's counsel to carefully work over the intercreditor issues.

Critical to that process was the fact that MBIA had also wrapped the original deal. The terms of the original 144A notes did not permit any change to the concession agreement, collateral or support obligations from Cintra. However, the terms of the MBIA wrap gave the insurer the right to consent to all such amendments on behalf of US investors and hence the flexibility to get the second deal done.

Autopista del Maipo is an innovative answer to under-performing markets and there is no reason why the structure could not also be used in greenfield financings, particularly those with a supportive concession awarder but uncertain prospects. However, Maipo is also a solution from which Cintra, subject to the MDI mechanism, may not see a return for a very long time – albeit a guaranteed return.

Autopista del Maipo Sociedad Concesionaria SA
Status: Closed 14 October 2004
Size: $450 million shelf registration
Description: Refinancing of a 266km toll road
Sponsor: Cintra
Debt to date: $175 million bond issue, $60 million standby facility
Bookrunner and facility provider: ABN Amro
Placement agent: BBVA
Monoline insurer: MBIA
Bond maturity: 19 years
Coupon: 4.69%
Sponsor legal: White & Case (international), Estudio Morales (local)
Lenders' legal: Debevoise & Plimpton (international), Claro y Cia (local)