The Gasoducto GasAndes Refinancing 2 funded on December 10 and lead sponsor Total finally got many of the cross-guarantees agreed in the first GasAndes financing off its books.

The pipeline runs from La Mora, Mendoza, Argentina, up to the city of Santiago, Chile, and was originally financed under a short-term facility in 1996. That bridge financing was extended by Credit Lyonnais for a year in December 2002. But a full non-recourse long term solution was becoming increasingly urgent.

Past attempts at refinancing were foiled by a combination of changes of ownership in both the project and its sponsors and difficulties thrown up by the Argentinean default.

The deal is notable in that it was achieved without political risk insurance - deemed an unnecessary expense given Argentina's record of earnings from gas exports. However the structure also incorporated some nifty manipulation of Total's guarantees, reducing the sponsor's overall exposure while pulling in corporate pricing on elements of the debt.

The debt portion owed by GasAndes Argentina (GAA) and the one owed by GasAndes Chile (GAC) were refinanced under different conditions. Both had their debt payment deadlines extended - substantially in the case of GAC. Both also offered guarantees on different type of assets And Total granted additional guarantees to the existing ones.

Lead arranged by Societe Generale (SG), the overall $168 million in debt comprises a $136 million club package split between three 8-year term loans of $93 million non-recourse, $21 million and $22 million each for the Chilean project company. On the Argentinean side of the deal BBVA acted as sole arranger on a $32 million 3-year term loan. Repayments on all loans are quarterly and pricing on the non-recourse portion is 350bp over libor for the first four years of its eight-year tenor.

Ironically the Argentinean side of the project has stronger cashflows. Nevertheless, the deal is split into two, with Total fully guaranteeing the Argentinean debt and guaranteeing only a portion of debt on the Chilean side, along with the project company.

The sum debt guaranteed by Total on the Chilean side is $43 million, which reflects the minimum 35% holding permitted for Total in the project company. Its guarantee comes in return for a fee, but also enables Total to pay corporate rates - 35bp - on that portion of the debt.

Other than some issues on the Chilean side over security, overall the deal went smoothly with very few legal headaches in the push from unsecured to secured financing. Sullivan & Cromwell acted for the sponsors with Milbank Tweed advising the lenders.

GasAndes Refinancing 2

Status: Closed 10 December 2003

Description: $168 million refinancing for gas pipeline between Argentina and Chile

Project companies: GasAndes Argentina; GasAndes Chile

Sponsors: Total (55%); Gener; MetroGas; Compania General de Combustibles

Financial advisory: Societe Generale (SG)

Mandated lead arrangers Chilean debt: SG; ANZ; RBS; Dexia; KBC; Fortis.

Sole arranger Argentinean debt: BBVA

Legal counsel to sponsors: Sullivan & Cromwell (US); Beretta Kahale Godoy (Argentina); J Olleros & Asociados (Spain); Bahamondez, Alvarez y Gazmuri Abogados (Chile)

Legal counsel to lenders: Milbank, Tweed, Hadley & McCloy (US); Cariola Diez Perez-Cotapos (Chile); Fortunati & Lucero (Argentina)