PIATCO: Asia’s airport first
Syndication for Asia's first privately financed BOT airport is
drawing to a close. Co-ordinating lead arrangers ADB, IFC, DKW and
KfW have put together a $440 million project finance facility for
Philippines Airport International Air Terminals Co. (PIATCO).
Comprised of Fraport (40%), Nissho Iwai (10%) and local sponsors
People's Air Cargo and Warehousing and the Philippine Airport
Ground Service, PIATCO has a 25-year concession to construct and
operate a third terminal at Ninoy Aquino International Airport in
Metro Manila, the Philippines.
Ninoy Aquino is the main airport in the Philippines, 10 km outside Manila's business centre, Makati City. The new terminal, located adjacent to the existing two, will take over all international operations. Four years in the making, financial close was described as a benchmark by a number of its architects. Both the IFC and ADB have long expressed a desire to promote private investment in the airport sector in Asia.
?The major difficulties in putting this deal together surrounded perceived political risk and operational risk,? explains Jo Yamagata, senior investment officer at the ADB. Since it was the first private airport in the region, even the global operators do not have the specific experience. ?All the normal risks have a new dimension,? he continues.
ADB joined the project when the concession was originally granted to local sponsors in 1997. Following various, specifically aviation, economic crises it was decided that international operators and lenders were needed. In 1999 Fraport AG, Frankfurt Airport Services Worldwide, which had thus far acted as an adviser on the project, was invited to take up an equity stake. Fraport's financial adviser, Dresdner, assumed a role as lead arranger. Nissho Iwai was also wooed in order to boost the international profile of the sponsor. In 2000 the IFC and other commercial banks came on board.
The debt had been fully underwritten before the launch of syndication. The co-ordinating lead arrangers were joined by ABB Structured Finance, Helaba Bank and Nord L/B under the title of lead arrangers. For those coming in at syndication, a commitment of $25 million or more will achieve arranger status, $15 to $24 million lead manager and $10 to $14 million co-lead manager.
The debt breaks down into six facilities; a $50 million IFC A loan; a $40 million ADB A loan; a $50 million IFC B loan; a $40 million ADB complementary loan; a $110 million commercial loan and a $150 million tranche covered by German export credit agency GKA. The latter four are up for syndication and the commercial facility has 100% political cover from AIG.
Syndicating banks sign up on a 2:1 ratio. For international banks this applies to the commercial facility: IFC B loan / ADB complementary loan. For German banks the GKA loan takes the place of the commercial. The commitment fee on all four is 50bp. Margins are 350 bps p.a. on both the multilateral tranches, 210 bps p.a on the commercial and 300 bps p.a. on the GKA facility. Repayments on all take the form of semi annual instalments, although the commercial loan has a tenor of 12 years, compared to 15 for the other three.
Syndication close is projected for the end of August. An insider states that appetite for the deal so far appears to be good. The deal indeed holds allure beyond the tight political cover put in place. A syndications spokesperson from one of the lead arranging banks points to comfort provided by the fact construction is already underway. On the back of equity financing, building began in June 2000 and is scheduled for completion by December 2002. The construction contract was awarded to Takenaka Corp of Japan and the offshore procurement contract to Asahikosan. Takenaka provides a corresponding guarantee, wrapping the two contracts.
Operational risk is mitigated by the ?brownfield' nature of the project. On its completion, terminal 3 will take over all international operations currently managed by terminals 1 and 2. Thus roughly 70% of its 10 million design capacity already exists.
Furthermore, the Government of Philippines has awarded PIATCO an exclusivity right over any new international air traffic generated in the country. The three, allegedly tiny, airports at Subic Bay, Clark and Laoag City will continue to operate but no new concessions will be awarded for international terminals unless traffic coming into Ninoy Aquino exceeds its capacity.
PIATCO also estimates that almost half of revenues will come from duty free shops in the airport and other major cities.
Additional securities woven into the deal include; first ranking mortgage on assets of the borrower; a pledge on the borrower's shares; fixed charge over the borrower's rights titles and interest in the borrower's accounts; assignment of all revenues income, rent and profit from the assigned agreement; floating charge over the borrower's assets; charge over onshore and offshore accounts.
Lenders may be happy with the deal they are presented with but voices of discontent over the deal have been heard from within the Philippines. Local companies have objected to PIATCO's intention to reduce the number of ground handling service providers dealing with international operations from three or four to two, claiming it will have an adverse effect on the local economy. Practical reasons are allegedly behind the decision, which will be enforced. Most busy international airports only have one, or at most two, ground service handlers. Still wary, however, some press in the Philippines has suggested that the contract put in place was unfairly advantageous to the project company.
Despite domestic disquiet, the deal has been widely branded a success by international participants. Jo Yamagata hopes it will lead to an increase in private investment in airports in Asia. Neither the private nor the public sector has had much experience in the region. ?Governments have been wary since airports are linked to the notion of national security and they are also by nature a monopoly, which they are cautious of awarding to private bodies,? he says. ?From the private point of view, companies have been unsure about how to raise finances and whether lenders will assume some of the risks.?
Ninoy Aquino is the main airport in the Philippines, 10 km outside Manila's business centre, Makati City. The new terminal, located adjacent to the existing two, will take over all international operations. Four years in the making, financial close was described as a benchmark by a number of its architects. Both the IFC and ADB have long expressed a desire to promote private investment in the airport sector in Asia.
?The major difficulties in putting this deal together surrounded perceived political risk and operational risk,? explains Jo Yamagata, senior investment officer at the ADB. Since it was the first private airport in the region, even the global operators do not have the specific experience. ?All the normal risks have a new dimension,? he continues.
ADB joined the project when the concession was originally granted to local sponsors in 1997. Following various, specifically aviation, economic crises it was decided that international operators and lenders were needed. In 1999 Fraport AG, Frankfurt Airport Services Worldwide, which had thus far acted as an adviser on the project, was invited to take up an equity stake. Fraport's financial adviser, Dresdner, assumed a role as lead arranger. Nissho Iwai was also wooed in order to boost the international profile of the sponsor. In 2000 the IFC and other commercial banks came on board.
The debt had been fully underwritten before the launch of syndication. The co-ordinating lead arrangers were joined by ABB Structured Finance, Helaba Bank and Nord L/B under the title of lead arrangers. For those coming in at syndication, a commitment of $25 million or more will achieve arranger status, $15 to $24 million lead manager and $10 to $14 million co-lead manager.
The debt breaks down into six facilities; a $50 million IFC A loan; a $40 million ADB A loan; a $50 million IFC B loan; a $40 million ADB complementary loan; a $110 million commercial loan and a $150 million tranche covered by German export credit agency GKA. The latter four are up for syndication and the commercial facility has 100% political cover from AIG.
Syndicating banks sign up on a 2:1 ratio. For international banks this applies to the commercial facility: IFC B loan / ADB complementary loan. For German banks the GKA loan takes the place of the commercial. The commitment fee on all four is 50bp. Margins are 350 bps p.a. on both the multilateral tranches, 210 bps p.a on the commercial and 300 bps p.a. on the GKA facility. Repayments on all take the form of semi annual instalments, although the commercial loan has a tenor of 12 years, compared to 15 for the other three.
Syndication close is projected for the end of August. An insider states that appetite for the deal so far appears to be good. The deal indeed holds allure beyond the tight political cover put in place. A syndications spokesperson from one of the lead arranging banks points to comfort provided by the fact construction is already underway. On the back of equity financing, building began in June 2000 and is scheduled for completion by December 2002. The construction contract was awarded to Takenaka Corp of Japan and the offshore procurement contract to Asahikosan. Takenaka provides a corresponding guarantee, wrapping the two contracts.
Operational risk is mitigated by the ?brownfield' nature of the project. On its completion, terminal 3 will take over all international operations currently managed by terminals 1 and 2. Thus roughly 70% of its 10 million design capacity already exists.
Furthermore, the Government of Philippines has awarded PIATCO an exclusivity right over any new international air traffic generated in the country. The three, allegedly tiny, airports at Subic Bay, Clark and Laoag City will continue to operate but no new concessions will be awarded for international terminals unless traffic coming into Ninoy Aquino exceeds its capacity.
PIATCO also estimates that almost half of revenues will come from duty free shops in the airport and other major cities.
Additional securities woven into the deal include; first ranking mortgage on assets of the borrower; a pledge on the borrower's shares; fixed charge over the borrower's rights titles and interest in the borrower's accounts; assignment of all revenues income, rent and profit from the assigned agreement; floating charge over the borrower's assets; charge over onshore and offshore accounts.
Lenders may be happy with the deal they are presented with but voices of discontent over the deal have been heard from within the Philippines. Local companies have objected to PIATCO's intention to reduce the number of ground handling service providers dealing with international operations from three or four to two, claiming it will have an adverse effect on the local economy. Practical reasons are allegedly behind the decision, which will be enforced. Most busy international airports only have one, or at most two, ground service handlers. Still wary, however, some press in the Philippines has suggested that the contract put in place was unfairly advantageous to the project company.
Despite domestic disquiet, the deal has been widely branded a success by international participants. Jo Yamagata hopes it will lead to an increase in private investment in airports in Asia. Neither the private nor the public sector has had much experience in the region. ?Governments have been wary since airports are linked to the notion of national security and they are also by nature a monopoly, which they are cautious of awarding to private bodies,? he says. ?From the private point of view, companies have been unsure about how to raise finances and whether lenders will assume some of the risks.?
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