After a year in which the French PPP market effectively ceded leadership to the Benelux, the Eu1.769 billion ($2.42 billion) Nimes-Montpellier high-speed rail financing is probably the last reminder of France’s former dominance. The deal was the third and final big-ticket high-speed rail project to be procured by the French government.and was one of the largest greenfield infrastructure projects to close in Europe last year.

“What made the project successful is that we had a strong heritage from previous high-speed rail projects, including Tours-Bordeaux,” says Julien Touati, investment director at Meridian Infrastructure. “We managed to go from preferred bidder to financial close in the space of six months and that included documenting a project which included all the leading banks active in Europe.”

The sponsors were able to put together a financing package that included a long maturity project risk facility. The deal was also smaller than previous high-speed rail deals, but involved a larger chunk of private funding and fewer subsidies.

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.

Reseau Ferre de France (RFF), the regional council for Languedoc-Roussillon and the central government signed a declaration of intent in 2008 and pulled in three bids from the French construction majors – Bouygues, Eiffage and Vinci. Eiffage pulled out shortly before best and final offers were due but the other two continued to the final decision.

RFF named the Bouygues-led consortium preferred bidder in January last year. The decision came as little surprise, since Vinci was tied up with the Eu7.8 billion Tours-Bordeaux high-speed rail project. Bouygues also went into the bidding stage with support from a wider pool of lenders: BBVA, BTMU, CIC, DZ Bank, HSBC, KfW-IPEX, Mizuho, Natixis, Societe Generale and UniCredit.

The bank club shifted slightly after the offers went in, but the deal signed last year on broadly the same terms that sponsors and lenders had already agreed. The financing closed in June last year through Eu1.189 billion in long-term debt, split between a Eu117 million equity bridge loan, a Eu19 million VAT revolver, and a Eu1.053 construction loan, which is to be refinanced after construction.

The construction loan will be refinanced with a Eu828 million Dailly facility from CDC and the EIB and a Eu225 million commercial bank tranche from eleven lenders – BayernLB, BBVA, BTMU, DZ Bank, HSBC, KfW-IPEX, Mizuho, Natixis, SMBC, Societe Generale and UniCredit. The project risk tranche leads to a tail of about 2 years on the concession, while the tenor for the Dailly facility matches the concession length.

The tenor for the VAT facility is 8 years, while the equity bridge loan has a tenor of 5 years. The financing is then rounded off with Eu480 million in subsidies. The deal features a standard debt service reserve account, equivalent to six months of debt service obligations. Repayments on the long-term debt are due to start at the beginning of operations and are 6-monthly.

The pricing on the equity bridge loan is flat at 200bp over Euribor, while the pricing on the VAT facility is also set at a flat 175bp rate. The pricing on the commercial bank debt starts at 250bp during the construction phase and then peaks at 290bp following a series of step-ups during operations. The pricing on the Dailly facility is fixed and is roughly 4.2% for the EIB and 3.6% for CDC.

The project company has already drawn on the senior debt after meeting all of the final conditions precedent. The sponsors have already started construction and the project is due to start operations in October 2017. Nimes-Montpellier may be the last of the mega infrastructure projects in France after the new government launched a review of its PPP programme. The deal incorporates the best trends of the last few years, including a healthy mixture of multilateral, government and commercial bank support, and a speedy timetable within which the sponsors reached financial close. 

OC’Via
STATUS
Signed and closed 28 June 2012
SIZE
Eu1.669 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 (9.8%), Colas (5%), Alstom Transport (2.4%), Spie Batignolles (2.8%), Meridiam Infrastructure (53%) and FIDEPPP (27%)
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 ADVISERS
Natixis, Societe Generale
SPONSORS’ LEGAL ADVISER
Willkie Farr & Gallagher
SPONSORS’ INSURANCE ADVISER
Gras Savoye
LENDERS’ LEGAL ADVISER
Linklaters
LENDERS’ TECHNICAL ADVISER
Capita Symonds
LENDERS’ INSURANCE ADVISER
Marsh
EIB’S LEGAL ADVISER
Clifford Chance
CDC’S LEGAL ADVISER
Allen & Overy
EPC CONTRACTORS
Bouygues, Colas, DTP Terrassement, Alstom Transport, Spie Batignolles