The first privatization of its kind in Africa, five years in financing, ravaged by past civil wars and effectively off the transport map for 30 years ? the deal backing Mozambique's Maputo Port development is something of a landmark.

The Maputo Port Development Company (MPDC) has signed a 15-year concession to rehabilitate, operate and then transfer the port back to the state. The project finally reached financial close on April 14.

The deal is thought to be the only port privatization in Africa which includes privatizing the role of the port authority while enabling a private company to take control of the land as well. As such, it bears strong similarities in approach to port privatizations in the UK and New Zealand. It is part of the overall development that concludes the so-called ?Maputo Corridor?, which includes a railway link and road concession.

With the government maintaining a 49% share in the project company, as well as overall ownership at the end of the concession period, it might be better described as a public-private partnership. But though the government of Mozambique maintains overall regulatory control, day-to-day management and operation is completely under private control.

?It is not inaccurate to describe it as a public-private partnership, but it also includes a full privatisation ? that is, of the port authority's role,? says Simon Norris, partner at Cadwalader, Wickersham & Taft. The legislation put in place grants the company powers of the government Port Authority, making it the de facto authority: the company is enabled to take control of the land, extending into the waters of Maputo bay.

MPDC is a consortium 51% owned by a team of Mersey Docks, Skanska, Liscont and Gestors SARL, and 49% held by the Mozambique government's national transport authority, CFM (there is also an obligation for CFM to sell 16% of its stake within an agreed period).

Financing the deal proved more complicated than the sponsors had hoped: ?We should have ended up with a much simpler structure,? says Alec Don, chief executive of MPDC , ?but at the end of the day complexity is a function of the time the various parties took to review the deal.?

The issue was managing downside risk for the commercial lenders. ?The reason we got the deal multisourced is because getting this kind of long-term lending on the local market was not really possible, and the political risk was too great for international commercial lenders,? say Norris.

In all, $27 million of senior debt was sourced in two tranches. The first is from Standard Corporate Merchant Bank, under full political and partial commercial cover from Swedish agency SIDA; the second is a joint FMO and Development Bank of South Africa portion.

There is an additional sub-debt facility: roughly $7.5 million of mezzanine debt from a club of Nordic development finance institutions (DFIs): Swedfund, Finnfund, and the Nordic Development Fund.

In addition to their senior debt participation, FMO and DBSA are also providing a further amount of sub-debt, independent of the mezzanine tranche.

Commenting on the mezzanine tranche, George Kotsovos, manager, project finance, points out: ?our view as senior lenders was that it might have complicated the transaction a bit.? Nonetheless the facility does provide cashflow benefits, acting as an equity cushion.

Tenor on the debt is 10-12 years. Aside from the various guarantees on the debt, cover is also being provided for some of the shareholder loan and equity commitments under the World Bank's partial risk guarantee product.

Though the exact debt:equity split is as yet undisclosed, the aim is to get a 50:50 gearing after three years. ?The equity we contributed does look extremely small,? admits Don. But since the project is the rehabilitation of an existing port, there will be cash-flow from day one that will also be calculated as equity.

?If you take the project in its full context, its a typical limited recourse structure with normal sponsor support during the rehabilitation,? says Kotsovos.

The delay in getting the deal closed is largely down to the fact that it was dependent on the successful concessioning of the Maputo-South Africa rail link, which itself was only concluded recently. ?Negotiations on the rail link were very suspect,? suggests a banker close to the deal. ?But the close of that deal gave comfort that there was another transport network to South Africa, to protect the investment with sufficient traffic to and from Maputo.?

More fundamental, though, was the crafting of legal structures to allow the deal to move ahead. There was hardly any existing legislation for projects, especially involving full private sector control of public assets. Cadwalader therefore helped introduce a new legal structure in order to allow the private sector to hold public land.

?We had to start from scratch,? says Simon Norris at Cadwalader. ?On reflection, it was a bit of a nightmare. It didn't fall into place quickly.?

Control of access channel and other marine safety features were deemed better handled under a private ownership structure. ?It's essentially risk allocation,? says Don. ?The best way to be in control of these risks was to put it into private hands. The alternative would have been far less efficient ?

Tomaz Salamao, Mozambique's Minister of Transport and Communications, is widely credited for having provided the high-level political muscle key to the deal's completion.

?It is not intended to be a first world port per se, but it will certainly bring it up to better performing levels,? says Norris.

And the economic gains for the country could be significant, as Don points out: ?from our investment of roughly $70 million, we expect to get a multiplier of ten. So it really is a $700 million project.?

The port, the largest in Mozambique, is the closest port to the industrial heartland of South Africa. Exports from the region include steel products, ferro-alloys, coal, chrome and ore. It will also service Mozal, Mozambique's substantial aluminium smelter.

Maputo Port

Location: Mozambique

Sponsor: MPDC (51%: Mersey Docks, Skanska, Liscont, Mozambique Gestores; 49%, Mozambique government authority, CFM)

Description: the redevelopment and financing of the largest port in Mozambique through the first ever privatization of the role of a port authority in Africa.

Cost: $75 million

Lead Arrangers: Standard Corporate & Merchant Bank, DBSA, FMO, Swedfund, NDF, Finnfund

Financial adviser: Standard Bank

Lawyers to Sponsors: Cadwalader Wickersham & Taft

Lawyers to Lenders: Leboeuf & Lamb