Multi-currency and multi-lender-type financings invariably require lengthier negotiations than a straight commercially banked project. But the $786 million 12- to 15-year limited recourse debt facilities for Brazils Embraport project also required lenders to take on full port market risk no mean feat given three of the commercial banks on the project B loan are Eurozone-based. It also had to meet the sponsors requirement of currency risk mitigation during both construction and operations.

While the greenfield project had no service contracts in place with shippers therefore lenders are taking on full volume and berthing price risk post-completion the deal does benefit from the projects location in Santos and is designed to relieve significant congestion at what is Brazils largest port.

The project involves building a greenfield 1.2 million twenty-foot equivalent unit (TEU) capacity mixed-use container terminal and a liquid bulk terminal with a capacity of two million tonnes. The project will also contribute to improved traffic conditions in Santos, providing adequate road and rail connections away from the urban centre.

The project had a long gestation. Original sole sponsor Coimex formed Embraport after receiving approval for a fully private project from the federal maritime transport regulator Agencia Nacional de Transportes Aquaviarios in 1998. Embraport differs from its peer projects, which are either concessions or leases, and is the largest deal to be closed under a private regulatory regime in Brazil to date.

However, the project languished until Caixa Economica Federal- managed Fundo de Investimento do Fundo de Garantia do Tempo de Servico (FI-FGTS) took a stake in 2008: FI-FGTS remains indirectly involved with the project but is no longer an equity shareholder. Odebrecht and DP World bought a majority stake from the two sponsors in 2009 and the financing package was put together during the following year. The IADB approved a $430 million A/B loan in December 2010 and commercial lenders committed to the B loan in the first half of 2011.

Led by the Inter-American Development Bank (IADB) and Caixa Economica Federal (CEF), the $786 million debt financing for the project comprises a $430 million IADB A/B loan facility and a R633 million (355 million) locally denominated loan from CEF.

The A/B loan was split between a $100 million 15-year A loan and a $330 million 12-year B loan. Caixa Geral de Depositos, HSBC, Banco Santander and WestLB lead arranged the B loan.

The A loan priced at 337.5bp over Libor with step-ups to 387.5bp by maturity, and the B loan priced at 300bp over Libor with step-ups to 350bp over Libor by maturity.

The 15 year Caixa Economica loan is repasse: BNDES lent the funds to state-owned Caixa Economica, which although an intermediary still bears the full credit risk on the debt. The sponsors contributed $253.1 million in equity split 58% Odebrecht, 27% DP World and 15% Coimex.

The deal comes with a degree of natural hedging - the combination of financing in US dollars and Brazilian reais is designed to mitigate the currency risk during construction (local construction costs in reais versus international US dollar costs for equipment) as well as to provide flexibility in pricing future shipping contracts in either denomination during operation.

The financing was originally expected to close in the second quarter of 2011 but the complexity involved in assembling a diverse and untested combination of lenders the deal is the first IADB financing with international participants and Caixa Economica Federal fronting BNDES pushed that back to November.

Given the difference in timing and risk to lenders, pricing and tenor on Embraport compare favourably with those for the $679 million financing for APM Terminals and Terminal Investments $908 million Brasil Terminal Portuario (BTP) deal, which closed earlier, in March 2011.

Embraports financing carries a slightly wider spread 300bp and 337.5bp over Libor initially compared to 225bp over Libor on BTP and a shorter tenor 15 years and 12 years versus 16 years with a 2.25-year grace period on BTP. However, the Embraport deal lacks any service contracts, whereas BTPs sponsors benefitted from strong relationships with two of the largest container shipping lines in the world Maersk Line and MSC.

Empresa Brasileira de Terminais Portuarios
STATUS: Financial close 18 November 2011
TOTAL PROJECT COST: $1.04 billion
DEBT: $786 million
DESCRIPTION: Greenfield 1.2 million TEU and 2 million tonnes liquid bulk capacity mixed-use container and liquids terminal
SPONSORS: Odebrecht (58%), DP World (27%) and Grupo Coimex (15%)
CONCESSION AWARDER: Agencia Nacional de Transportes Aquaviarios
LENDERS: Inter-American Development Bank, Caixa Economica
Federal, Caixa Geral de Depositos, HSBC, Banco Santander and WestLB
FINANCIAL ADVISER: HSBC
SECURITY TRUSTEE: BNY Mellon
SPONSOR LEGAL COUNSEL: Souza, Cescon, Barrieu & Flesch; Davis Polk & Wardwell
LENDER LEGAL COUNSEL: Dias Carneiro; Milbank
CEF LEGAL COUNSEL: White & Case; Pinheiro Neto Advogados
HEDGE PROVIDER COUNSEL: Machado Meyer
SECURITY TRUSTEE COUNSEL: Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados; Hogan Lovells
MODEL AUDITOR: Operis
TECHNICAL CONSULTANT: Moffatt & Nichol
INSURANCE CONSULTANT: Willis
ENVIRONMENTAL AND SOCIAL CONSULTANT: JGP Consultoria e Participacoes EPC CONTRACTORS: Consorcio Construtora Norberto Odebrecht; Jan de Nul do Brasil