Spanish toll road operators have suffered from rising costs and falling traffic levels, and have kept banks’ portfolio managers much busier than their originators. So the financing for the Celanova shadow toll road provided a welcome respite from the relentless bad news. The sponsors closed its financing in August last year, after agreeing to a suite of lender-friendly terms, including full cash sweeps at the start of repayments and recourse to their balance sheets.

The project entails the construction of a new 18.74km fast-lane dual carriageway in the Spanish province of Ourense under a 30-year design, build, finance and maintain concession. The road, once completed, will link the town of Celanova to the A52 motorway.

The grantor, the Xunta de Galicia, awarded the project to a Copasa-led consortium ahead of four other bidders – Dragados, FCC, Isolux Corsan and SanJose – in early 2008. The sponsors have so far been financing construction internally and have been seeking a long-term financing ever since, in order to remove the burden on their balance sheets.

The pressures in Spain have meant that lender appetite for long-term debt is not what it used to be. The deal eventually closed in June last year through Eu52 million ($71 million) in long-term debt from a club of four banks – Banesto, Banco de Sabadell, BBVA and La Caixa. This was the third time in four years that the sponsors had sought to implement a long-term project financing.

Copasa went into the bidding stage with the support of two banks – BBVA and Banesto – and approached both lenders to finance the project in early 2009. The deal struggled to get off the ground because of the financial crisis and banks were unable to get the deal past credit committee. The deal eventually closed last year with a wider pool of lenders and only after the grantor agreed to an increase in shadow toll levels.

The long-term debt is split between two tranches, a Eu48.5 million term loan and a smaller Eu3.5 million tranche, which effectively acts as a performance incentive facility. The sponsors have already drawn on the debt and have used the proceeds to reimburse themselves for the equity they have put into the project and to fund the final stages of construction.

The term loan has a legal maturity of 20 years, although cash sweeps start at 100% at the outset of repayments and there are a slew of other lender-friendly terms, which are designed to prompt an early refinancing. Lenders benefit from full recourse to the sponsors’ balance sheet during the ramp-up phase and also a pledge from the sponsors to inject additional equity if needed.

This undertaking by the sponsors functions as the opposite to the performance incentive facility. The former is designed to add comfort to lenders in the event that traffic volumes prove to be less robust than initially forecast, whereas the latter is designed to reward the sponsors and to allow them to benefit if the initial forecasts prove to be too conservative.

The sponsors have so far contributed Eu42.9 million in equity and have promised to inject a further Eu17.5 million, depending on several scenarios, including a cash shortfall for the debt service coverage ratio, which averages 1.35x under the base case. Other scenarios include a delay to completion of the project, a termination of the project company and a failure to refinance at the end of fiscal year 2014.

The financing is rounded off with a Eu12 million VAT facility, which has a tenor of 1.5 years and bullet repayment, and a standard debt service reserve account, equivalent to six months of debt service obligations. The pricing on the senior debt starts at 450bp over 6-month Euribor before rising to 463bp in 2015 and peaking at 475p in 2016.

Ticket sizes vary slightly between the four lenders. BBVA and La Caixa are both lending Eu21 million each, while Banco de Sabadell and Banesto are lending Eu16 million and Eu6 million respectively. Repayments are six-monthly and are due to start after a one-year grace period. The date for the start of operations has been pushed back until the middle of February although this should not affect the debt repayments.

Before the onset of the financial crisis, Spain embarked on a series of toll roads projects. Several of these projects have experienced lower than expected traffic volumes and are struggling to refinance, having been funded on a miniperm basis. Celanova shows that project financings can still be closed, even if only using the most bespoke financing structures. 

Aucel
STATUS
Closed 26 June 2012
SIZE
Eu124.4 million
DESCRIPTION
19km shadow toll road in Ourense, Galicia, Spain
GRANTOR
Xunta de Galicia (regional government of Comunidad Autonoma de Galicia)
SPONSORS
Copasa 70%, Extraco 30%
MANDATED LEAD ARRANGER
Banesto, Banco de Sabadell, BBVA, La Caixa
SPONSORS’ FINANCIAL ADVISER
BBVA
LENDERS’ LEGAL ADVISER
Garrigues
LENDERS’ TRAFFIC ADVISER
Jacobs
LENDERS’ INSURANCE ADVISER
Jacobs
LENDERS’ INSURANCE ADVISER
Aon
LENDERS’ TECHNICAL ADVISER
Typsa
MODEL AUDITORS
Deloitte, PricewaterhouseCoopers
EPC CONTRACTORS
Copasa, Extraco