The financing for the Eu720 million ($983 million) Rotterdam Port Gateway port expansion was six years in the making, taking in more than one financial crisis and a determined legal challenge. But it persuaded lenders to commit to a 20-year tenor on one of the larger Eurozone financings in 2012.

The sponsors of Rotterdam Port Gateway are DP World (30%), APL (20%), MOL (20%), Hyundai (20%) and CMA CGM (10%). The consortium is building a new 110-hectare container terminal at the Maasvlakte II site, the location for the expansion to Europe’s largest port. The sponsors won the 25-year concession for the terminal in 2007.

The first phase of the project, the subject of the 2012 financing, involves building a new 2.35 million TEU container terminal, including 14 quay cranes, 59 automatic guided vehicles, 32 automatic stacking cranes and 16 automatic cantilever cranes. The crane suppliers are ZPMC and Gottwald, while the infrastructure construction contractor is BAVO Gateway, a joint venture of BAM and VolkerWessels, and the buildings contractor is Cordeel.

The lead arrangers of the Eu360 million debt package, which starting pricing in the region of 350bp over Euribor and a 20-year tenor, were BTMU, WestLB, ABN Amro, KfW, Mizuho, NIBC and SMBC. During the deal’s gestation the pricing on the debt crept up from a planned 250bp. To get the banks comfortable with the long tenor, the deal features cash sweeps that should see the debt paid down in 16 years.

The financing was probably the last in which WestLB participated before it became asset manager Portigon Financial, but four other lenders with prominent infrastructure franchises also could not reach the finish line. Lloyds and BNP Paribas dropped out towards the end of 2011, Credit Agricole at the beginning of 2012, and DNB and Rabobank in the final months before financial close.

The deal brought together four high-profile shipping lines with the Dubai World-controlled DP World. DP World entered the top rank of port operators with the 2005 acquisition of P&O Ports. The 13-year old operator was unable to insulate itself from Dubai’s 2009 struggles with its creditors, leading to a Moody’s downgrade that year from A1 to Ba1. In 2011, however, its rating recovered to Baa3, and it added to its Dubai NASDAQ listing with an LSE listing.

Lenders suffered more from legal challenges to the project than the credit of its sponsors, Throughout a prolonged depression in the shipping industry and sluggish macroeconomic growth, Rotterdam, a European logistics hub, enjoys advantages over newer sites that comfort lenders.

But the port also housed a disgruntled competitor. Chinese shipping line ECT launched several challenges to the DP World-led project, demanding either that the concession for Rotterdam World Gateway be annulled or it receive Eu900 million in compensation.

ECT’s challenge hints at one reason for lender comfort with the project – that the new terminal would lure cargoes from the ECT-run terminal, because the four shipping line shareholders in RWG are existing ECT customers. But the sponsors and Port Authority for Rotterdam still had to reassure lenders that the suit was unlikely to affect their exposure to the project.

ECT’s suit highlighted one risk factor that lenders also wanted reassurance about. ECT’s challenge in part rests on the idea that the port authority’s projections of future demand mean that adding extra capacity will force terminal operators into cutthroat competition. But Rotterdam World Gateway only has to build extra capacity at its terminal once volumes reach particular levels. Lenders have ensured that the construction and volume risk attached to that second phase would be completely isolated from the first phase.

Work started on the new terminal the day after financial close, and the construction of sea walls and dredging is now far advanced. Beach locations at the site should be ready for use around the middle of this year, though the terminal is unlikely to open before the end of the third quarter of 2014.

Over the last four years the number of deals that can be described as pre-2008 hangovers has fallen. Lenders digest, or restructure, difficult proposed financings, though by now almost all new deals conform to the new realities. The Rotterdam financing asked lenders to stick to older financing norms, though not all of its banks could come along with the sponsors. It will be a very powerful sponsor that persuades debt markets to repeat the feat.

Rotterdam World Gateway
Status
Closed 19 June 2012
Size
Eu720 million
Description
Financing for new container terminal in Rotterdam, Netherlands
Sponsors
DP World (30%), APL (20%), MOL (20%), Hyundai (20%) and CMA CGM (10%)
Debt
Eu360 million
Tenor
20 years
Mandated lead arrangers
BTMU, WestLB, ABN Amro, KfW, Mizuho, NIBC and SMBC
Borrower financial adviser
Rothschild
Borrower legal advisers
Norton Rose (finance), Clifford Chance (procurement)
Lender legal adviser
Linklaters
Lender market adviser
OSC
Lender technical adviser
Royal Haskoning
Lender insurance adviser
Marsh
Model auditor
BDO
Equipment suppliers
ZPMC, Gottwald
Infrastructure construction contractor
BAVO Gateway (BAM/VolkerWessels)
Buildings contractor
Cordeel