The A8 II was the first of the second round of German A-Models to close, and one of the country’s first major road infrastructure projects to close after the last financial crisis. The challenge on the A8 II’s immediate predecessor, the A5, was salvaging a pre-crisis deal in the months following Lehman’s collapse. The A8 II, by contrast, involved launching a deal in the midst of the crisis, and not knowing what state debt markets would be in when it was time to close.

“There were major changes, like the introduction of a uniform toll rate, compared to the first wave of four A-models (A8 I, A4, A1 and A5), which made the structuring easier,” says Hans-Christian Kattwinkel, managing director of PANSUEVIA, who hails from the Strabag side of the venture. “However, the world obviously had changed since Lehman broke down and there was uncertainty among some potential lenders regarding the expected impact of the crisis and how long it would last.”

Given the timing of the project and the fact that the structure incorporated full traffic risk at a time of dwindling traffic volumes throughout the German road network, grantor innovations on previous A-model deals, such as a uniform toll rate, helped shore up bank support. In addition, a structure that included strong multilateral support, in the form of the European Investment Bank’s loan guarantee instrument for TENS transport, helped steer the deal to close.

The 30-year concession entails the maintenance and operation of a 58km stretch of the A8 motorway, of which about 41km is to be widened. The federal government collects tolls on heavy goods vehicles using the section, using the Toll-Collect system, and the state of Bavaria then compensates the project company according to levels of usage.

Unlike previous A-models, the grantors went for a uniform toll rate, which was subject to competitive bidding and then indexed by the state. The federal government could raise the rate at which the tolls are collected, but the sponsors would have to be compensated if this occurred.

In previous deals, the state charged a different rate depending on the emission class of the vehicles using the route. This is difficult to predict and also meant that the sponsors risked facing a higher proportion of more environmentally friendly trucks using the road. The state decided that, given the volatility in traffic levels at the time, the deal would be more bankable if this risk were removed.

Autobahndirektion Südbayern, the motorway authority for southern Bavaria, prequalified four bidders in 2009: Bilfinger Berger/John Laing, advised by PwC; EGIS/Porr, advised by Macquarie; Hochtief/Strabag, advised by UniCredit; and Royal BAM/Vinci, advised by Deutsche. Two bidders – Bilfinger/Berger and Hochtief/Strabag – were then shortlisted in May 2010 with best and final offers due in September.

Hochtief and Strabag narrowly beat off the challenge of Bilfinger Berger and John Laing, by 96.39 points to 96.25. What followed, however, was a lengthy legal appeal from the losing consortium, first to the South Bavarian procurement review board and then to the regional high court in Munich, which delayed the start of the concession by about 6 months.

Hochtief and Strabag were given a tight 8- week deadline to close the deal in mid-April, following the dismissal of Bilfinger and Laing’s legal appeal. The deal closed on 31 May, slightly earlier than the timeline stipulated, because of sponsors’ reluctance to delay the start of the concession any longer.

The EIB is providing Eu149 million ($194 million) in senior long-term debt, with a tenor of 28 years. Sponsors also have the option to draw on the EIB’s loan guarantee instrument, the LGTT, if traffic volumes fall below a certain threshold. The A8’s Eu59.6 million LGTT is close to the instrument’s 20% of senior debt cap, and is available for four years post-construction.

“In general one must say the EIB in particular during the time of the financial crisis was very important for other banks as an assurance that this is a solid deal” says Wilfried Rammler, managing director at Hochtief. “The LGTT proved to be valuable. We could have done the financing of the project without it but it did have a favourable impact on the conditions of the banks.”

A club of three banks – BBVA, L-Bank and Unicredit – are providing Eu150 million in commercial debt. UniCredit is taking the largest ticket, at Eu76.8 million, while BBVA and L-Bank took Eu62 million and Eu11.2 million, respectively. Though the debt has a nominal tenor of 27 years, the commercial banks went for a balance between a classic long-term facility and a miniperm in order to attract sufficient liquidity.

The structure encourages a refinancing by year 14, with cash sweeps hitting 100% at this point. Lenders’ willingness to accept exposure to the refinancing risk meant that margins are fairly generous, starting at 270bp over Euribor and then rising to 320bp over the life of the loan. The minimum debt service coverage ratio is 1.4x.

The sponsors are providing Eu77.6 million in equity, split on a 50:50 basis, in addition to a Eu22 million standby facility. The financing is rounded off with a Eu75 million subsidy from the federal government, which the authorities did not put up for competition among the different bidders during the process in order to mitigate commercial capacity for financing the deal.

Pansuevia
STATUS: Financial close 31 May 2011
DESCRIPTION: Expansion of a motorway between Ulm and Augsburg, Bavaria, from 2x2 to 2x3 lanes, and the operation and maintenance of the motorway for 30 years
SIZE: Eu473.6 million
GRANTOR: Autobahndirektion Südbayern
SPONSORS: Hochtief Concessions, Strabag
MLAS: BBVA, Unicredit
OTHER LENDERS: European Investment Bank, L-Bank
GRANTOR’S FINANCIAL ADVISER: Investitionsbank Schleswig-Holstein
GRANTOR’S LEGAL ADVISER: Norton Rose
SPONSORS’ FINANCIAL ADVISER: UniCredit
SPONSORS’ LEGAL ADVISER: Freshfields
SPONSORS’ TRAFFIC ADVISER: Intraplan
LENDERS’ LEGAL ADVISER: CMS Hasche Sigle
LENDERS’ TECHNICAL ADVISER: Scott Wilson
LENDERS’ TRAFFIC ADVISER: Arup
EIB’S LEGAL ADVISER: Clifford Chance
MODEL AUDITOR: Ernst & Young
EPC CONTRACTORS: Hochtief Solutions, Heilit & Woerner Bau