The closing of the €2.35 billion ($3.18 billion) financing for the BreBeMi toll road project could serve as a spur to further deals in the country. The deal is notable for featuring a large debt package and for being the first pure project financing for a greenfield toll road in Italy. But its greatest achievement was to incorporate a wide variety of non-commercial bank sources of capital, including Italy’s export credit agency SACE and the European Investment Bank (EIB) into a workable financing structure that mitigated banks’ weaknesses in the tenor and pricing they could offer.

Societa di Progetto BreBeMi SpA

STATUS

Signed 25 March 2013, financial close 26 June 2013

SIZE

€2.35 billion

DESCRIPTION

Financing for the construction of 62.1km tolled motorway between the cities of Brescia, Bergamo and Milan, Italy, as well as 35km of interconnecting freeways

GRANTOR

CAL S.p.A.

SPONSORS

Autostrade Lombarde., Impresa Pizzarotti e C., Consorzio Cooperative Construzioni – CCC Societa Cooperativa

MANDATED LEAD ARRANGERS

Credito Bergamasco, Intesa Sanpaolo,

MPS Capital Services, Ubi Banca,

UniCredit (documentation agent, facility agent)

OTHER LENDERS

CDP, European Investment Bank

ECA

SACE

SPONSORS’ LEGAL ADVISER

Norton Rose Fulbright

BANKS’ LEGAL ADVISER

Ashurst

EIB’S LEGAL ADVISER

Chiomenti Studio Legale

CDP & SACE’S LEGAL ADVISER

Legance

SPONSORS’ INSURANCE ADVISER

Marsh

LENDERS’ INSURANCE ADVISER

AON

LENDERS’ TECHNICAL ADVISER

Protos

LENDERS’ TRAFFIC ADVISER

Steer Davies Gleave

EPC CONTRACTOR

Consorzio BBM (consortium of CCC Societa Cooperativa and Impresa Pizzarotti e C)

O+M CONTRACTOR

Argentea Gestioni

The deal has been about a decade in the making and in February 2012 the sponsors signed a €546 million bridge loan with Intesa Sanpaolo, Centrobanca, MPS Capital and UniCredit. The bridge was meant to fund the early stages of construction, but the banks had to extend its maturity twice, while negotiations with banks about long-term funding dragged on. They signed commitment letters in mid-2011 with five banks – Credito Bergamasco, Intesa Sanpaolo, MPS Capital Services, Ubi Banca (formerly Centrobanca) and UniCredit – but the deal stalled after lenders’ cost of funding soared.

Italian state lender Cassa Depositi e Prestiti (CDP) had already agreed to lend to BreBeMi, and the EIB committed in early 2012. Both banks agreed to provide local lenders a type of pass-through funding, which would allow the lenders to offer debt at a competitive margin and long tenor, and allow the sponsor to receive a reasonable return on investment.

The EIB was cautious about accepting any project risk because of the low credit rating of the other lending institutions, and so relied on SACE as a guarantor. The deal signed in March and funded in June, comprising €1.52 billion in long-term facilities, split equally between 20-year amortising and 21-year bullet debt.

The amortising debt comprises a €398 million loan from commercial lenders (with EIB pass-through funding and a SACE guarantee of the banks’ credit risk), a €40 million facility from commercial banks (with CDP pass-through funding), a €71 million loan from the EIB (with a guarantee from SACE for the project risk) and €251 million from CDP direct.

The bullet debt comprises a €509 million direct loan from CDP, a €196 million commercial bank facility (with EIB pass-through funding and a SACE guarantee for the intermediating banks’ credit risk), a €35 million loan from the EIB (with a SACE guarantee for the project risk), and a €20 million loan from commercial banks (with CDP pass-through funding).

The remaining debt of €298.5 million comprises a €50 million standby facility from the commercial banks (guaranteed by SACE for up to €7 million), a €200 million VAT facility (guaranteed by SACE for up to €28 million), and a €48.5 million performance bond facility (for which SACE is providing a guarantee for up to €7 million).

The financing is rounded off with €520 million in equity, €17 million in contingent equity, to be used if the standby facility is drawn, and €70 million in an equity reserve account. The equity reserve is designed to bring the project’s gearing back in line with the financing’s base case in the event that there is a draw on the standby facility.

The support from SACE and the EIB for BreBeMi is unprecedented, since both have restrictions on both the types of funding they are able to provide and the types of projects they can support. For other projects, shorter debt tenors of about seven or eight years will probably be the norm, but the deal will still provide a template for stretching out financings, even those from sickly banks, to much longer maturities.