On 20 February Eiffarie, the holding company for the French motorway network Autoroutes Paris-Rhin-Rhone (APRR), signed a Eu2.765 billion ($3.686 billion) five-year term loan refinancing of its existing holding company debt. Simultaneously, APRR signed a Eu720 million 5-year revolving credit facility, which will replace its existing undrawn credit facilities at the operating company level.

The deal is the culmination of a refinancing process that started in January 2011, when APRR completed the first of five new bond issues that partly refinanced an acquisition facility that signed in 2006, as well as several bonds issued before the road was fully privatised that were approaching maturity. It involved around Eu3.485 billion in bank debt, and the deal is likely to be one of the largest deals to close in Europe in 2012.

Eiffarie is a holding company for four sets of toll road assets, of which APRR is the most important. The 2,279km APRR network serves several major business centres, including the Paris-Lyon corridor that links France’s two major cities and also serves as a gateway to most of Europe.

Eiffarie’s shareholders are Eiffage, with a 50% stake, Macquarie Atlas Roads with 19%, and other Macquarie funds, with 31%. Eiffaire took control of APRR in 2006 when it bought out the French state, and has steadily bought out minority shareholders in APRR, with the aim of capturing more of its dividends and gaining easier access to its tax losses, and now has a roughly 99% stake.

The acquisition was funded with a Eu3.8 billion acquisition loan at the holdco level and a Eu1.8 billion revolving credit facility at the opco level. Although the companies’ loans are not due to mature until 2013, the sponsors looked to refinance a year earlier in order to drive APRR’s credit rating up from BBB-/Baa3 so that it could improve capital market access.

APRR has hardly been a stranger to the bond market, and has been able to roll over its debt since the Eiffarie acquisition. In January 2011, it decided to return to the market, raising around Eu2.5 billion at ever- lower coupons during a period of about 12 months through to January this year. Part of the proceeds were used to increase the ratio of bond to bank debt and replace draws on credit facilities at the opco. They also allowed for the payment to Eiffarie of an upstream dividend of around Eu1 billion earlier this year.

The refinancing closed with a group of 17 banks, which are tiered on the basis of the amount that each is lending. Banks in tier 1 – BBVA, BTMU, CBA, Lloyds, Mediobanca, Natixis, RBC, Santander and Societe Generale – are lending in excess of Eu300 million on both the opco and holdco debt. Credit Agricole and CIC, both tier 2 banks are taking tickets in excess of Eu150 million and banks in tier 3 – Banco Sabadell, BayernLB, ING, KfW, La Caixa and WestLB – are lending less than Eu150 million.

Bank debt at the opco level ranks pari passu with the bond debt and is senior to the holdco debt. There is little security for lenders at the opco level, though lenders have a charge over shares at the holdco level, which means that they will be able to step in if APRR becomes insolvent.

Margins on the debt are fairly aggressive, though lenders managed to extract a margin rise from sponsors in late 2011. This was the third and final term sheet presented to banks since the sponsors approached banks in the third quarter of 2011. The sponsors originally proposed a step-down mechanism based on how quickly APRR could reduce leverage, but banks apparently baulked at this structure.

Pricing on the holdco debt starts at 300bp with a step-up of 50bp in year 4 and a further 50bp in year 5, while the margin on the opco debt is flat at 100bp. There are also cash sweeps on the holdco loan, which start at 25% for the first three years, before rising to 75% in year 4 and 100% in year 5. Upfront fees on the opco debt are 150bp, while tier 1 banks on the holdco loan were rewarded with a healthy 275bp fee, which was designed to encourage banks’ participation in the holdco refinancing. The holdco loan has a single bullet repayment at maturity. Six banks – BBVA, Commerzbank, Macquarie, Natixis, RBS and Societe Generale – are hedging the interest rate on the holdco debt under a hedging programme dating to 2006.

That the sponsors were able to close the deal within the framework that was outlined in 2011 and maintain access to such a large and diverse group of lenders is testament to the credit strength of APRR. APRR is a mature network with around 55 years of operating history and a diverse mix of traffic. Its net debt-to-Ebitda ratio has fallen each year since it was privatised, reaching 4.4x at the end of last year.

The sponsors will hope that the timely refinancing will translate into an improved credit rating. Although stable, its current rating does not allow for constant capital markets access at reasonable spreads. Moody’s announced shortly after close that APRR’s credit rating would be unaffected by the refinancing, although it would continue to monitor future financial policies.

APRR/Eiffarie
STATUS: Financial close 20 February 2012
SIZE: Eu3.485 billion
DESCRIPTION: Refinancing of existing debt signed in 2006 supporting the acquisition of APRR, a network of French toll roads spanning over 2,000km
SPONSORS: Eiffage (50%), Macquarie Atlas Roads (31%), other Macquarie funds (31%)
MLAS: BBVA (syndication agent), BTMU (syndication agent), CBA (syndication agent), CIC, Credit Agricole, Lloyds (syndication agent), Mediobanca (syndication agent), Natixis (syndication agent), RBC (syndication agent), Santander (syndication agent) and Societe Generale (facility agent, documentation agent, syndication agent)
OTHER LENDERS: Banco Sabadell, BayernLB, ING, KfW, La Caixa, WestLB
SPONSORS’ FINANCIAL ADVISER: Rothschild
SPONSORS’ LEGAL ADVISERS: Bredin Prat, Clifford Chance
LENDERS’ LEGAL ADVISER: Gide Loyrette Nouel