The long term debt backing India’s largest cross-border leveraged infrastructure financing to date signed on 30 March, with strong interest from international banks. Mundra Port and Special Economic Zone – sponsored by Adani – raised a A$1.25 billion ($1.29 billion) five-year non-recourse loan and an $800 million seven-year loan from Indian banks, structured as a letter of comfort (LoC) facility. The deal also removes Adani’s corporate guarantee (included in the original bridge loan for the project) from the international bank tranche – a key reason for the refinancing.

The refinancing replaces a $2 billion one- year bridge financing backing the A$1.83 billion acquisition of a 99-year lease on Abbot Point X50 Coal Terminal in Australia (since renamed Adani Abbot Point Terminal) from the Queensland government. The original acquisition bridge financing comprised two one-year $1 billion tranches from State Bank of India (SBI) and Standard Chartered, respectively, with corporate guarantees from Adani.

Under the 99-year lease, the state will retain ownership of the port land and fixed infrastructure such as the jetty and the wharf. The state will also continue to facilitate future private sector-funded expansion of export infrastructure within the broader port precinct. NQBP remains as port authority for Abbot Point, responsible for the safety, security, efficiency and master planning for the port.

Adani Abbot Point Terminal is Australia’s northernmost coal port and has a current capacity of 50 million tonnes per year (tpy) with the opportunity for future expansion. Coal is supplied to the terminal by rail from the Sonoma, Newlands and Collinsville mines, and following the recent opening of the Missing Link rail line (part of the A$1.1 billion Goonyella to Abbot Point expansion project) late last year, the terminal is now also exporting coal from the central Bowen Basin mines.

The deal compliments Adani’s buy-out of Linc Energy’s Galilee coal project in 2010 by vertically integrating the shipping of coal from Galilee to Adani’s coal-fired power plants in India, notably the 4,620MW Mundra (Kutch) project.

The sponsors began looking for a refinancing in October 2011, with Australian banks, Commonwealth Bank of Australia, National Australia Bank and Westpac the first port of call. “We approached Australian banks first as we found there was a lot of appetite for the asset,” says B. Ravi, the chief financial officer of Adani Ports & SEZ “The banks knew the asset and were comfortable providing financing.”

The Australian banks are providing the largest shares of the bank debt, with Commonwealth Bank of Australia providing $310 million, National Australia Bank $260 million and Westpac providing $260 million. The three banks were soon joined by BTMU, which is providing $156 million, Mizuho ($104 million), Standard Chartered ($104 million) and OCBC ($78 million) to complete the financing on the $1.25 billion five-year non-recourse loan.

The debt is competitively priced at 275bp over BBSY. A $74 million repayment is due after 3 years and the remainder as a bullet repayment at the end of the five-year tenor. The debt service coverage (DSCR) is 1.65x and the sponsor provided $135 million in equity.

The financing is rounded out with an $800 million facility from bookrunner and sole mandated lead arranger SBI. The SBI tranche takes the form of a LoC from SBI to SBI London, which acts as lender. The LoC has a number of benefits for both lender and sponsor. For SBI it enables it to keep the risk on its Indian balance sheet while its overseas branch acts as lender, thus keeping the balance sheet of the overseas branch immune from failures abroad. It also enables SBI to sell down the risk to other Indian banks without those banks actually providing funding.

The benefit of the LoC to the sponsor is a lowering of the ultimate cost of borrowing. The pricing on the tranche is split into two parts – commission on the LoC and interest on the US dollar loan. Commission on the LoC is exempt from withholding tax for Australia – reducing the sponsor’s overall cost of payments to the Indian banks in the deal.

The syndication saw sell-down of the exposure to a number of Indian banks – believed to be Axis Bank, Bank of India, Central Bank of India, Punjab & Sind Bank, Punjab National Bank, State Bank of Hyderabad, State Bank of India, State Bank of Patiala, State Bank of Travancore and UCO Bank. The LoC tranche also benefits from an Adani corporate guarantee, with repayment due in years 4 and 7. The seven-year facility is priced at a flat 280bp over Libor, which is fairly typical for the current market.

Adani Abbot Point Terminal
STATUS: Closed 30 March 2012
SIZE: $2.2 billion
DESCRIPTION: A$1.25 billion ($1.29 billion) five-year non-recourse loan and $800 million seven-year loan, structured as a letter of comfort (LoC) facility, to help refinance the $2 billion acquisition bridge loan raised last year to buy Abbot Point Terminal from the Queensland government.
SPONSOR: Mundra Port and Special Economic Zone Ltd – sponsored by Adani.
EQUITY: $135 million
DEBT: A$1.25 billion ($1.29 billion) unguaranteed loan
$800 million guaranteed LoC facility
LENDERS: The Commonwealth Bank of Australia ($310 million), National Australia Bank ($260 million), Westpac ($260 million), BTMU ($156 million), Mizuho ($104 million), Standard Chartered ($104 million) and OCBC ($78 million), SBI London ($800 million)
RISK PARTICIPANTS: Axis Bank, Bank of India, Central Bank of India, Punjab & Sind Bank, Punjab National Bank, State Bank of Hyderabad, State Bank of India, State Bank of Patiala, State Bank of Travancore and UCO Bank
FINANCIAL ADVISERS: Macquarie Capital and Standard Chartered
SPONSOR LEGAL COUNSEL: Freehills
LENDER LEGAL COUNSEL :Clayton Utz