Deal of the Year 2010

Singapore Sports Hub:

UK PPP with a big twist

The S$1.76 billion ($1.31 billion) Singapore Sports Hub, the world’s largest sports infrastructure PPP, reached financial close on 26 August 2010. The project was the first PPP to close in Asia after the finan­cial crisis. While the project agreement is largely based on UK PPP/PFI standards, it is not a traditional PPP project because of its complex contractual structure. Spon­sors had to address the need to accommodate an existing oper­ational asset – the Singa­pore Indoor Stadium – as well as balance multiple sub­contractors each tak­ing on different responsibilities during the oper­ational phase.

SportsHub Pte, the project company, raised a S$1.5 billion 10-year soft mini-perm from a group of 11 banks and a S$266 million equity bridge with a three-year, seven-month tenor from four of those banks.

Singapore Sports Hub Consortium (SSHC) is sponsoring the 25-year concession. Its equity partners comprise HSBC Infrastructure (82%), Bouygues’s Asian subsidiary Dragages (11%), Global Spec­trum (4%) and United Premas (3%). These are just the equity holders in a much larger consortium requiring a complex interface agreement that apportions responsibility not just between design/build and facilities maintenance contractors, but also a venue operator, sports consultant, catering contractor, retail mana­ger and ICT pro­vid­er. The project com­pany’s wide ambit effectively makes it a small trading company.

HSBC was the financial adviser to the consortium and forms part of a bank group that includes Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Credit Agricole, DBS Bank, National Aus­tra­lia Bank, Natixis, Overseas-Chinese Banking Corporation, SMBC, Standard Chartered and WestLB.

The mini-perm has a nominal tenor of 24 years with a balloon payment at year 10. Margins are 250bp over Sibor for the first five years, with a step-up to 275bp after that. The margin is 175bp on the equity bridge loan, which HSBC, NAB, Natixis and SMBC are providing. The package comes with a refinancing guarantee at year 10 from the government and the debt service cover ratio is 1.15x. The debt was between 30% and 50% oversubscribed, with ticket sizes ranging from S$100 million to S$200 million.

The deal comes with a mechanism to ensure that any cost savings that result from an early refinancing are shared with the government through a review of the unitary payment.

The project, located on a 35-hectare site in Kallang, includes a 55,000-capacity National Stadium, a 6,000-capacity indoor Aquatic Centre, a 3,000 capacity multi-purpose arena, the exist­ing 12,000-capacity Singapore Indoor Stadium and supporting leisure and commercial developments, including 41,000 square metres of commercial space.

The Sports Hub is scheduled to open its doors by April 2014. To provide further comfort to lenders, Dragages’ obligation under the design and build contract will be supported by a parent company guarantee from Bouygues Construction.

The government will make unitary payments to the sponsor, which will be sufficient for meeting payments on the project debt before the balloon repayment. However, there is a profit sharing mechanism in place for the third party revenues, ensuring that a sizeable portion goes back to the government. The government hopes this means the project will end up paying for itself, with the third party revenues big enough to cover the unitary pay­ments. The banks are protected from this commercial aspect of the project by a complex account structure that effectively keeps third party revenues separate from the PPP.

The concession awarder, the Singapore Sports Council (SSC), has guaranteed at least 90 days of events at the National Stadium and 46 days at the Singapore Indoor Stadium.

The global finan­cial crisis also made this a difficult pro­ject to close. When it reached the market in November 2009 the bank market had begun its recovery but was not yet buoyant.

The project had already been subject to delays when the SSC named SSHC as the preferred bidder in January 2008, ahead of competition from consortiums led by Macquarie and Alpine. All in­volv­ed realis­ed there was no chance of meeting the rather optimistic official timetable of clos­ing the financing within two months, especially as price inflation from the earlier delay had pushed up the construction cost.

When it became clear that the initially proposed 23.5-year debt facility backed by BTMU, Calyon, Depfa, DZ Bank and HSBC was no longer feasible, the govern­ment reconsidered its options and at one point thought about using public fund­ing. In the end a funding competition was launched in the autumn of 2010, with 10-year debt on a take-and-hold basis preferred over longer-tenor and under­written options. 

SportsHub Pte
Status: Closed 26 August 2010
Size: S$1.79 billion
Description: Construction of several sports stadia and associated commercial operations
Sponsors: Dragages, HSBC Infrastructure, Global Spectrum and United Premas
Concession awarder: Singapore Sports Council
Senior debt: S$1.5 billion
Tenor: 10-year soft mini-perm
Lenders: Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Credit Agricole, DBS Bank, HSBC, National Australia Bank, Natixis, Overseas-Chinese Banking Corporation, SMBC, Standard Chartered Bank and WestLB
Financial adviser: HSBC
Lender legal counsel: Ashurst
Sponsor legal counsel: Norton Rose
Concession awarder legal counsel: Hogan Lovells Lee
Concession awarder financial: PwC
Lender technical: Faithful and Gould
Environmental adviser: Mott MacDonald
Insurance advisers: Aon (lender), Willis (sponsor)
Market and tax adviser: KPMG
Ministry of Finance financial adviser: Deutsche Bank
Ministry of Finance legal advisers: Linklaters Allen & Gledhill