AdR: Runway success?
The non-recourse loan for Italy's largest ever project finance
transaction ? an Eu1.725 billion take out for Aeroporti di Roma ?
signed last month. The deal is also the first project financing of
an airport in Italy and the first project financing in the
country's transport sector ? as such, it hints at the shape of
future Italian transport deals.
Barclays, Mediobanca, Banca Monte del Paschi di Sena, Banco Nazionale del Lavoro and Unicredito Italiano closed the 16 year facility for sponsor Aeroporti di Roma (AdR), owned by Gemina holding company (42%) and Falck (31%), Italpetroli (16%), and Impregilo (11%) (Leonardo Consortium). AdR is the concessionaire of Rome's two airports, Fiumicino-Leonardo da Vinci and Ciampino.
The deal was initially presaged last year, after the Leonardo consortium's successful acquisition financing of AdR, although the facility was only drawn up in May this year. It subsequently skirted from due diligence to drawdown in three months, ending August 8.
The transaction involves the take out of a hybrid Eu1.725 million facility for the Leonardo consortium's acquisition last year of AdR. Beyond an Eu17.5 million bridge at the level of the project company, the bulk of that sum was made up from an Eu1.55 billion acquisition financing, recourse to the sponsors.
The new deal, however, moves the entire sum ? Eu1.725 billion ? to the project company level, refinancing AdR's existing debt and debt raised by the consortium to acquire AdR.
?They went non-recourse because of the size,? explains Allen & Overy's Franco Vigliano, who advised the lenders. The tenor runs 16 years, and the deal features a step-up pricing mechanism linked to the company's ratings.
Says Mediobanca's Luigi Cuttica, ?When we arranged last year's bridge loan, we also drew up plans for long term financing, non recourse to the sponsors. We finally had the opportunity to go for something more structured ? and what we have now is a very tight deal, in terms of covenants, distributions, and so forth.?
?There is an urgent need in Italy for privately financed airport facilities. This deal clearly opens the way for Italian airport financings. Demonstrating private financing capacity is key ? and we've done that,? says Vigliano.
He also points out the merits of regional coordination. ?We did this exercise entirely from Italy. This was the first time a transaction of this size was done by global firms on site.?
Moody's Investors Service recently assigned a (P)A3 long term debt rating to the facility, its outlook stable.
The terms of the bank facility ?significantly restrict [AdR] management's ability to take action that may prejudice the position of the bank lenders,? according to Moody's. In particular, the consortium is restricted from further leveraging AdR, making investments beyond AdR's lender approved business plan, or making shareholder distributions without the proper DSCR's being met; ?these structural enhancements are an important contributor to the A3 rating,? says the report.
AdR owns a concession to exclusively operate airports serving Rome until 2044, although the ownership of the physical airport assets remains with the Italian State.
Key to AdR's success will be its traffic base. The company's revenues derive mostly from charges levied on passengers using the airports, aircraft take-off and landing charges and other aeronautical charges. It expects to achieve some significant increases in passenger growth over the medium term.
Interestingly, AdR has invested in ACSA, the South African Airports Corporation ? itself a target for several airports and consortia throughout Europe. The move is intended to shore up AdR's broader strategy of becoming the hub for connections to and from the Southern Hemisphere.
This Southern Hemisphere strategy is itself carefully crafted to combat possible threats to traffic flow ? the fact, for instance, that Alitalia, Italy's main state airline, shifted in 1998 26% of its international frequencies and 57% of its intercontinental frequencies from Rome to Milan.
The company may even take the lead of some of its peers by expanding its activities outside of the Rome airport system.
Nevertheless, says Cuttica, ?we are very confident that AdR will make its financial obligations ? it's a solid company operating a very stable business in a major, and hence reliable, city. There's little scope for error.?
Privatization is rapidly reshaping the European airport industry ? far advanced from its US and Asian counterparts in relinquishing state control. This is a significant change from a few years ago when continental airports were struggling against the European Commission's attempt to split their monopolies.
Airport privatizations are also drawing a wide array of investors from outside the industry ? among those bidding for AdR last year were Benetton and Pirelli.
The attraction, of course, is simple enough ? airports are low-risk, high-return businesses. After runways and terminals are built, fixed costs are relatively stable while passenger traffic is rising at around 5%-6% annually.
But privatization is also spreading for other reasons. In many cases, local and federal governments are no longer willing or able to finance airports' ambitious growth programs. Many airports also are taking stakes in foreign facilities in a bid to create global network. For instance, Schiphol and Frankfurt, which were partners in a consortium that made an unsuccessful bid for Aeroporti di Roma, are eyeing moves abroad after their privatizations.
This may also be the case for AdR ? the company's business model going forward will be to evolve from a local company, focused on handling services, to a global company, tasked with the management and planning of infrastructure and the co-ordination of services rendered at its airports by specialist operators.
Barclays, Mediobanca, Banca Monte del Paschi di Sena, Banco Nazionale del Lavoro and Unicredito Italiano closed the 16 year facility for sponsor Aeroporti di Roma (AdR), owned by Gemina holding company (42%) and Falck (31%), Italpetroli (16%), and Impregilo (11%) (Leonardo Consortium). AdR is the concessionaire of Rome's two airports, Fiumicino-Leonardo da Vinci and Ciampino.
The deal was initially presaged last year, after the Leonardo consortium's successful acquisition financing of AdR, although the facility was only drawn up in May this year. It subsequently skirted from due diligence to drawdown in three months, ending August 8.
The transaction involves the take out of a hybrid Eu1.725 million facility for the Leonardo consortium's acquisition last year of AdR. Beyond an Eu17.5 million bridge at the level of the project company, the bulk of that sum was made up from an Eu1.55 billion acquisition financing, recourse to the sponsors.
The new deal, however, moves the entire sum ? Eu1.725 billion ? to the project company level, refinancing AdR's existing debt and debt raised by the consortium to acquire AdR.
?They went non-recourse because of the size,? explains Allen & Overy's Franco Vigliano, who advised the lenders. The tenor runs 16 years, and the deal features a step-up pricing mechanism linked to the company's ratings.
Says Mediobanca's Luigi Cuttica, ?When we arranged last year's bridge loan, we also drew up plans for long term financing, non recourse to the sponsors. We finally had the opportunity to go for something more structured ? and what we have now is a very tight deal, in terms of covenants, distributions, and so forth.?
?There is an urgent need in Italy for privately financed airport facilities. This deal clearly opens the way for Italian airport financings. Demonstrating private financing capacity is key ? and we've done that,? says Vigliano.
He also points out the merits of regional coordination. ?We did this exercise entirely from Italy. This was the first time a transaction of this size was done by global firms on site.?
Moody's Investors Service recently assigned a (P)A3 long term debt rating to the facility, its outlook stable.
The terms of the bank facility ?significantly restrict [AdR] management's ability to take action that may prejudice the position of the bank lenders,? according to Moody's. In particular, the consortium is restricted from further leveraging AdR, making investments beyond AdR's lender approved business plan, or making shareholder distributions without the proper DSCR's being met; ?these structural enhancements are an important contributor to the A3 rating,? says the report.
AdR owns a concession to exclusively operate airports serving Rome until 2044, although the ownership of the physical airport assets remains with the Italian State.
Key to AdR's success will be its traffic base. The company's revenues derive mostly from charges levied on passengers using the airports, aircraft take-off and landing charges and other aeronautical charges. It expects to achieve some significant increases in passenger growth over the medium term.
Interestingly, AdR has invested in ACSA, the South African Airports Corporation ? itself a target for several airports and consortia throughout Europe. The move is intended to shore up AdR's broader strategy of becoming the hub for connections to and from the Southern Hemisphere.
This Southern Hemisphere strategy is itself carefully crafted to combat possible threats to traffic flow ? the fact, for instance, that Alitalia, Italy's main state airline, shifted in 1998 26% of its international frequencies and 57% of its intercontinental frequencies from Rome to Milan.
The company may even take the lead of some of its peers by expanding its activities outside of the Rome airport system.
Nevertheless, says Cuttica, ?we are very confident that AdR will make its financial obligations ? it's a solid company operating a very stable business in a major, and hence reliable, city. There's little scope for error.?
Privatization is rapidly reshaping the European airport industry ? far advanced from its US and Asian counterparts in relinquishing state control. This is a significant change from a few years ago when continental airports were struggling against the European Commission's attempt to split their monopolies.
Airport privatizations are also drawing a wide array of investors from outside the industry ? among those bidding for AdR last year were Benetton and Pirelli.
The attraction, of course, is simple enough ? airports are low-risk, high-return businesses. After runways and terminals are built, fixed costs are relatively stable while passenger traffic is rising at around 5%-6% annually.
But privatization is also spreading for other reasons. In many cases, local and federal governments are no longer willing or able to finance airports' ambitious growth programs. Many airports also are taking stakes in foreign facilities in a bid to create global network. For instance, Schiphol and Frankfurt, which were partners in a consortium that made an unsuccessful bid for Aeroporti di Roma, are eyeing moves abroad after their privatizations.
This may also be the case for AdR ? the company's business model going forward will be to evolve from a local company, focused on handling services, to a global company, tasked with the management and planning of infrastructure and the co-ordination of services rendered at its airports by specialist operators.
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