Government of Panama-owned Empresa Nacional de Autopista (ENA) closed a $395 million bond issue to partially finance the buy-out of ICA’s 19.8km Corredor Sur toll road concession on 23 August. With its first deal done, the buyer can now turn its attention to the still pending buy-out of PYCSA’s 14km Corredor Norte concession. While the concession is back in public hands, the financing is completely standalone and differs from the earlier privately-sponsored bond financing for the road mostly because it is larger.

The 144A regulation S bonds were split pari passu between a global $170 million amortising tranche with a 14-year maturity and a $225 million local tranche with a seven-year maturity. The long bonds carry an all-in fixed rate of 5.25% and the short bonds a fixed rate of 5.75%, both payable quarterly. The short tranche is also interest-only with accelerated amortisation towards the end of its life. HSBC and Global Bank were joint lead book­runners of the issue, which attracted mostly Panamanian investors.

ENA Sur Trust issued the bonds and will own the road. ENA and ICA subsidiary ENA Sur jointly established the trust, with Citi as trustee, with the buyer contributing $50 million in capital, and the seller assigned the ownership rights for the road to the trust. Following close, the trust made a $420 million payment to ICA for the assets. Estif Aparicio, a partner at ARIFA in Panama City, says the government used the limited liability company and trust structure to buy the road in order to make it clear to bondholders that their recourse was only to the road.

The bonds have a loan life coverage ratio of 1.32x, and structural protections that include a $15 million debt service reserve account, $1 million major maintenance reserve account and $3.6 million litigation reserve. The deal also includes a covenant that obliges the borrower to raise tolls in the event that the debt service coverage ratio falls below 1.75x. Fitch Ratings rated the issue BBB (global) and AAA (Panama) and Standard & Poor’s BBB- (global).

ICA used the proceeds of the sale in part to repay a $150 million bridge loan from Fondo Fiduciario de Desarrollo (FFD), the Panamanian Fiduciary Trust Fund. The bridge financing was used to repay $140.1 million in outstanding debt against the road when it closed on 1 August. It was due in full when the bonds closed but, in the case they did not, would have converted to a 10-year term loan with terms similar to the prepaid outstanding debt. Government-owned Banco Nacional de Panama, the trustee of FFD, provided the loan on behalf of the fund. ICA realised $220 million from the sale of the concession.

Corredor Sur runs 19.8km from the centre of Panama City to Tocumen International Airport. Panama’s Ministry of Public Works awarded the 30-year concession to ICA in August 1996. The sponsor financed construction of the road, which opened in June 1999 and February 2000, with bridge loans. It closed a $70 million financing package with the International Finance Corporation, which includ­ed A and C loans from the multilateral’s account and a B loan through Banco Santander and WestLB, in September 1999. ICA refinanced the multilateral debt with a $150 million bond issue for Corredor Sur Trust in May 2005. Merrill Lynch underwrote the 20-year issue that carried an all-in interest rate of 6.95%. BNY Mellon (offshore) and Banco General (onshore) were trustees.

The Panamanian government decided to buy back its two toll road concessions – Corredor Sur and Corredor Norte – from their respective sponsors in March 2010. The decision followed a nearly year-long audit of its toll road concession programme. While the government is still negotiating the acquisition of Corredor Norte with PYSCA, ENA is already planning to finance the roughly $550 million deal with a $400 to $500 million 144A regulation S bond issue that will also be underwritten by HSBC and Global Bank.

There are roughly $148 million in improvements planned for the Corredor Sur, according to engineering firm Omni­consult. The government plans to finance these through the sale of marine fill-in rights and, if those fall short, on its own balance sheet. Works include widening the existing two-lane sections to three lanes in each direction and the existing westbound three-lane section to four lanes in each direction. They are scheduled to be complete in January 2014. ICA subsidiary Maxipista will continue to operate the road until an international tender is completed for a new operator in 2012. Proyeco is advising ENA on the procurement.

Arifa was local legal counsel to the issuer, lenders and trustee, Icaza, Gonzalez-Ruiz & Aleman was also local counsel to the issuer and Arnold & Porter was international counsel. Aleman, Cordero, Galinda & Lee was local counsel to the seller and Hogan Lovells was international counsel to the lenders. Shearman & Sterling was trustee counsel. ■

ENA Sur Trust
Status: Closed 23 August 2011
Size: $395 million
Location: Panama City, Panama
Description: 144A regulation S bond issue to finance government buy-out of 19.8km Corredor Sur toll road
Seller: ICA
Buyer: Empresa Nacional de Autopista (ENA)
Issuer: ENA Sur Trust
Debt: $220 million seven-year tranche and $170 million 14-year tranche
Underwriters: HSBC and Global Bank
Trustee: Citi
Issuer legal counsel: Arnold & Porter (international), Icaza, Gonzalez-Ruiz & Aleman (local)
Seller legal counsel: Aleman, Cordero, Galinda & Lee (local)
Lender legal counsel: Hogan Lovells (underwriter international) and Shearman & Sterling (trustee); Arifa (issuer, underwriter and trustee local)
Road operator: ICA subsidiary Maxipista
Independent engineer: Omniconsult
Traffic consultant: Halcrow Group
Independent consultant: Proyeco