On 28 June, OC’Via, a consortium comprising Bouygues, Colas, DTP Terrassement, Alstom Transport, Spie Batignolles, Meridian Infrastructure and FIDEPPP, closed the financing for the Eu1.79 billion ($2.81 billion) Nimes-Montpellier high speed rail project. The deal is one of the largest project financings to close in Europe so far this year.

The deal employs a broadly similar structure to Eiffage’s Eu3.4 billion Bretagne- Pays de la Loire (BPL) high-speed rail financing, the last availability-based high- speed rail deal to close in France. But its risk allocation is skewed far more towards the private sector than in the previous project. The financing involved more complex inter-creditor agreements than BPL, in large part because of the involvement of several financial sponsors, and carries far more maintenance risk than earlier high-speed rail PPPs. That the sponsors were able to raise commitments from such a large number of lenders, at a tenor of over 20 years, is impressive.

The project entails the construction of 60km of new line between Manduel, to the east of Nimes, and Lattes, to the west of Montpellier, under a 25-year design, build, finance and maintain concession.

The sponsors will also be responsible for the construction of 20km of lines connecting to the network, including 10km on the west bank of the Rhone river and a further 10km of lines to Jonquieres, Lattes and Manduel. The new line is the first French high-speed rail PPP designed for use by both passenger and freight traffic. Commercial operations are scheduled for October 2017.

The project’s recent history dates back to 2008, when Reseau Ferre de France (RFF), the regional council for Languedoc- Roussillon and central government signed a declaration of intent. The project pulled in three bids from the French construction majors – Bouygues, Eiffage and Vinci – although Eiffage pulled out shortly before best and final offers (BAFO) were due in October 2011.

On 12 January 2012, RFF named Bouygues preferred bidder, following an extraordinary meeting of its board of directors. The bids were evaluated on the basis of four criteria: financial, technical, environmental robustness, and involvement of SMEs. The decision came as little surprise, since Vinci is tied up with the Eu7.8 billion Tours-Bordeaux high speed rail project.

Bidders had to provide underwritten offers for half of the debt at the BAFO stage and Bouygues went in with support from 10 lenders: BBVA, BTMU, CIC, DZ Bank, HSBC, KfW-IPEX, Mizuho, Natixis, Societe Generale and Unicredit. WestLB had also been supporting Bouygues’ bid but failed to get credit approval in time. CIC has since withdrawn from the deal, while BayernLB and SMBC have joined.

Banks are providing Eu1.189 billion of debt, which is split between a Eu1.05 billion construction bridge loan, a Eu120 million equity bridge loan and a Eu19 million VAT revolver. The construction bridge loan will be replaced during operations with a Eu830 million Dailly facility provided by Caisse des Dépôts et Consignations (CDC) and the European Investment Bank (EIB), and a Eu220 million uncovered facility from the 11 lenders.

The tenor on the Dailly debt, including the construction phase, matches the concession length exactly and the uncovered facility has a tail of 2 years. The tenor on both the VAT revolver and the equity bridge loan is 7 years. Both long- term facilities are fully amortising, while both ancillary facilities have a bullet repayment at maturity. Repayments on the long-term facility start at the beginning of operations and are 6-monthly.

Banks are lending pro rata across all three tranches, while the EIB is providing roughly one-third of the Dailly debt and CDC is providing the remaining two- thirds. Pricing on the equity bridge loan and VAT facility is flat at 200bp and 175bp over Euribor, respectively. Pricing on the project facility starts at 250bp during construction and peaks at 290bp, following a series of step-ups.

The pricing on the Dailly facility is fixed, since the EIB and CDC borrow under different terms to the commercial banks. The EIB is lending at roughly 4.2%, while CDC is lending at a slightly lower rate of about 3.6%. The average debt service coverage ratio across all the facilities is 1.18x, although this is slightly higher for the project facility, at 1.7x.

The financing also features a debt service reserve account, equivalent to six months of debt service obligations, and is rounded off with roughly Eu120 million in equity and Eu480 million in subsidies, split between the central and regional governments. The subsidy payments will be made during the construction phase, upon the completion of certain milestones and are designed to match the drawdown schedule on the construction debt.

OC’Via
STATUS: Signed and closed 28 June 2012
SIZE: Eu1.79 billion
DESCRIPTION: Financing for the construction of a new 60km high-speed rail link between Manduel, to the east of Nimes and Lattes, to the west of Montpellier
GRANTOR: Reseau Ferre de France
SPONSORS: Bouygues, Colas, DTP Terrassement, Alstom Transport, Spie Batignolles, Meridiam Infrastructure and FIDEPPP
MLAS: BayernLB, BBVA (documentation, hedging), BTMU (documentation, technical, hedging), DZ Bank, HSBC (documentation, modelling), KfW-IPEX, Mizuho, Natixis (documentation, hedging), SMBC (documentation), Societe Generale (documentation, hedging), Unicredit
GRANTOR’S FINANCIAL ADVISER: RBC
GRANTOR’S LEGAL ADVISER: Hogan Lovells
SPONSORS’ FINANCIAL ADVISER: Natixis, Societe Generale
SPONSORS’ LEGAL ADVISERS: Willkie Farr & Gallagher
LENDERS’ LEGAL ADVISER: Linklaters
LENDERS’ TECHNICAL ADVISER: Capita Symonds
LENDERS’ INSURANCE ADVISER: Gras Savoye
EIB’S LEGAL ADVISER: Clifford Chance
CDC’S LEGAL ADVISER: Allen & Overy
EPC CONTRACTORS: Bouygues, Colas, DTP Terrassement, Alstom Transport, Spie Batignolles