Birmingham gets relief
By 2004, motorists travelling around Birmingham will have a tolled
alternative to the highly congested M6 section. On May 29 2001 the
Birmingham Northern Relief Road (BNRR) jumped its final hurdle,
with lead arrangers Bank of America and Abbey National treasury
Services plc. signing in 26 banks. The end of 2000 saw 17 banks
secured into a first phase of syndication the £685 million senior
debt. Structural changes initiated by the EIB are said to have
enticed the remaining players on board.
Narrowly beating Portugal's IP5 to the post, BNRR marks the largest syndicated project financing for a toll road in the world. Sponsors Macquarie Infrastructure Group (75%) and Autostrade S.P.A (25%) have injected a total of £147 million. An additional £20 million contribution from the DETR takes total funding up to £753.19 million. The BNRR has been hailed as the UK's largest ever road construction contract and its first ever toll road.
The project facility breaks down into a £637.75 million-term loan, a £36.75 million equity bridge guaranteed by Autostrade, a £8 million bond and a £2.5 million working capital facility. Syndicating banks have joined pro rata on tranches A and B, while lead arrangers have retained the latter two.
Tickets up for grabs were 60bp for a commitment of £30 million, 55bp for £25 million, 50bp for £20 million, 45 bp for 15 million or 40 bp for £10 million. Commitment fees were 40bp. Final allocations are as follows:
Abbey National has kept £114.9 million, while Bank of America, syndicating agent, is holding £34.385 million. The arranger category includes Lloyds TSB on £49.5 million, Banca OPI S.P.A and The Prudential Assurance Company at £39.87 million and Bank of Scotland, Bayerische Hypo- und Vereinsbank, NIB Capital Bank and Norddeutschebank Landesbank at £29.77 million.
Banco-Espirito Santo and National Bank of Greece have signed up as co-arrangers holding £24.88 million each. Senior lead managers have taken £19.8 million and are comprised of Banca Popolare di Milano, Bayerissche Landesbank, Dexia Credit Local and Sumitomo Mitsui Bank.
Lead arrangers Allied Irish Banks, Banca Nazionale del Lavoro, Banco BPI, Caixa Geral de Depositos, Commercial Bank of Greece, Credit Industriel et Commercial, Deutsche Verkehrsbank, KBC Finance Ireland, Landesbank Baden-Wuerttemberg and Landesbank Schelswig-Holstein are all holding £14.85 million. The remaining amount is made up with DG taking £9.9 million at manager status.
In addition to this wide spread of investment banks, the EIB have pledged to put up £250 million post construction, although they are not officially signed in yet. Their injection, subject to financial tests, will refinance a portion of the senior term loan. Throughout the course of their negotiations, the EIB have implemented a number of changes. The most significant is replacement of a 10-year bullet repayment by a cash sweep structure.
The new model is characterised by a 40-month construction period followed by a 24-month ramp up period. 18 months following this, 90% of cash flow available for debt service after payment of senior and subordinated interest is used to prepay senior debt. This increases to 100% in four steps over periods of 6 months. Final maturity dates dictated by the cash sweep, are 15.25 years according to base case and 16.75 years according to lower case.
The original bullet was designed to enable a quick refinancing after construction and the new scheme does not undermine this aim. The change arose in light of the EIB's reluctance to participate if commercial banks could call default on a project that was essentially on track but had not made its full bullet repayment on time. Margins were raised slightly relative to the original loan but this is heaviest felt at the tail end of the concession, by which time it is hoped that the debt will be taken out.
An oversubscribed, if protracted, syndication to finish a deal marking a number of precedents, has had the BNRR heralded as a success. Bankers are happy, developers are happy and presumably commuters are happy in the knowledge that come 2004, M6 congestion will be relieved. But the BNRR has not had an entirely smooth history. Initially proposed as publicly financed scheme in 1980, it was identified as a potential PFI in 1989. In 1992 a DBFO was awarded to Midlands Expressway Ltd. (MEL), then a consortium of Trafalgar House, later Kvaerner (50%) and Autostrade (50%). In 1999 Kvaerner sold their stake to Macquarie Infrastructure. Although they tried to retain the construction contract, this fell through and MEL opted for re-tendering.
The greatest obstruction to the developing BNRR has been strong resistance from environmental groups.
With planning and ownership issues in place, the BNRR finally looked set to become a reality. In September 2000 CAMBBA construction group secured the £485 million design and construction contract and the financial tender was awarded to Bank of America and Abbey National. CAMBBA is a special purpose vehicle made up of Carillion, McAlpine, Balfour Beatty and Amec. Financial close saw a last ownership change, with Macquarie purchasing 25% from Autostrade and securing an option to acquire the remaining 25% in 5 years.
A pressing issue has been mitigating perceived market risk associated with raising debt for the UK's first ever toll road. This is partly achieved merely in the nature of the project. The stretch of the M6 in question is so congested that a diversion of only 10 to 15% would be sufficient to service the BNRR debts. In addition, MEL has a 53-year concession and absolute power to change toll or tariff rates at their discretion. Building on this strong platform, architects of the financing were able to put together a package that soaked into the market with ease.
BNRR is a product of specific conditions. It is unlikely that real tolls will spring up all over the UK, but many of its lessons will be closely watched. Congestion charges will almost inevitably become integrated into urban life and the Irish government has proposed schemes combining tolls and grants.
Narrowly beating Portugal's IP5 to the post, BNRR marks the largest syndicated project financing for a toll road in the world. Sponsors Macquarie Infrastructure Group (75%) and Autostrade S.P.A (25%) have injected a total of £147 million. An additional £20 million contribution from the DETR takes total funding up to £753.19 million. The BNRR has been hailed as the UK's largest ever road construction contract and its first ever toll road.
The project facility breaks down into a £637.75 million-term loan, a £36.75 million equity bridge guaranteed by Autostrade, a £8 million bond and a £2.5 million working capital facility. Syndicating banks have joined pro rata on tranches A and B, while lead arrangers have retained the latter two.
Tickets up for grabs were 60bp for a commitment of £30 million, 55bp for £25 million, 50bp for £20 million, 45 bp for 15 million or 40 bp for £10 million. Commitment fees were 40bp. Final allocations are as follows:
Abbey National has kept £114.9 million, while Bank of America, syndicating agent, is holding £34.385 million. The arranger category includes Lloyds TSB on £49.5 million, Banca OPI S.P.A and The Prudential Assurance Company at £39.87 million and Bank of Scotland, Bayerische Hypo- und Vereinsbank, NIB Capital Bank and Norddeutschebank Landesbank at £29.77 million.
Banco-Espirito Santo and National Bank of Greece have signed up as co-arrangers holding £24.88 million each. Senior lead managers have taken £19.8 million and are comprised of Banca Popolare di Milano, Bayerissche Landesbank, Dexia Credit Local and Sumitomo Mitsui Bank.
Lead arrangers Allied Irish Banks, Banca Nazionale del Lavoro, Banco BPI, Caixa Geral de Depositos, Commercial Bank of Greece, Credit Industriel et Commercial, Deutsche Verkehrsbank, KBC Finance Ireland, Landesbank Baden-Wuerttemberg and Landesbank Schelswig-Holstein are all holding £14.85 million. The remaining amount is made up with DG taking £9.9 million at manager status.
In addition to this wide spread of investment banks, the EIB have pledged to put up £250 million post construction, although they are not officially signed in yet. Their injection, subject to financial tests, will refinance a portion of the senior term loan. Throughout the course of their negotiations, the EIB have implemented a number of changes. The most significant is replacement of a 10-year bullet repayment by a cash sweep structure.
The new model is characterised by a 40-month construction period followed by a 24-month ramp up period. 18 months following this, 90% of cash flow available for debt service after payment of senior and subordinated interest is used to prepay senior debt. This increases to 100% in four steps over periods of 6 months. Final maturity dates dictated by the cash sweep, are 15.25 years according to base case and 16.75 years according to lower case.
The original bullet was designed to enable a quick refinancing after construction and the new scheme does not undermine this aim. The change arose in light of the EIB's reluctance to participate if commercial banks could call default on a project that was essentially on track but had not made its full bullet repayment on time. Margins were raised slightly relative to the original loan but this is heaviest felt at the tail end of the concession, by which time it is hoped that the debt will be taken out.
An oversubscribed, if protracted, syndication to finish a deal marking a number of precedents, has had the BNRR heralded as a success. Bankers are happy, developers are happy and presumably commuters are happy in the knowledge that come 2004, M6 congestion will be relieved. But the BNRR has not had an entirely smooth history. Initially proposed as publicly financed scheme in 1980, it was identified as a potential PFI in 1989. In 1992 a DBFO was awarded to Midlands Expressway Ltd. (MEL), then a consortium of Trafalgar House, later Kvaerner (50%) and Autostrade (50%). In 1999 Kvaerner sold their stake to Macquarie Infrastructure. Although they tried to retain the construction contract, this fell through and MEL opted for re-tendering.
The greatest obstruction to the developing BNRR has been strong resistance from environmental groups.
With planning and ownership issues in place, the BNRR finally looked set to become a reality. In September 2000 CAMBBA construction group secured the £485 million design and construction contract and the financial tender was awarded to Bank of America and Abbey National. CAMBBA is a special purpose vehicle made up of Carillion, McAlpine, Balfour Beatty and Amec. Financial close saw a last ownership change, with Macquarie purchasing 25% from Autostrade and securing an option to acquire the remaining 25% in 5 years.
A pressing issue has been mitigating perceived market risk associated with raising debt for the UK's first ever toll road. This is partly achieved merely in the nature of the project. The stretch of the M6 in question is so congested that a diversion of only 10 to 15% would be sufficient to service the BNRR debts. In addition, MEL has a 53-year concession and absolute power to change toll or tariff rates at their discretion. Building on this strong platform, architects of the financing were able to put together a package that soaked into the market with ease.
BNRR is a product of specific conditions. It is unlikely that real tolls will spring up all over the UK, but many of its lessons will be closely watched. Congestion charges will almost inevitably become integrated into urban life and the Irish government has proposed schemes combining tolls and grants.
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