Colombia’s 4G toll road concessions program does not depend on one project alone. But Autopista Conexión Pacífico 3 wins the distinction for being the first project to reach financial close and, perhaps, for setting an example for other 4G roads to follow.
Goldman Sachs and local investment bank Structure arranged a unique package to fund the highway concession, putting together the equivalent of $650 million in long-term financing through a combination of bank loans and bonds. The elaborate arrangement makes Pacífico 3 a clear choice for Best Infrastructure Financing: Andes and Best Road Financing.
As it reached financial close in February this year, Pacífico 3 faced its share of challenges. "The week we closed the deal was the eye of the storm of the economic backdrop in Colombia," says John Greenwood, managing director at Goldman Sachs. The dollar stood close to historic highs against the Colombian peso and the country’s five-year credit default swap spread touched its highest point since 2008, he says. Despite that, Goldman Sachs placed two series of 19-year notes, including $260 million in dollars and $117 million in Colombia’s unidades de valor real (UVRs).
The financing package also included 900 billion Colombian pesos ($266 million) from two banks and an infrastructure debt fund. Bancolombia and CorpBanca split a 12-year loan for 450 billion pesos, while CorpBanca provided another 17-year loan for 150 billion pesos. A fund from Sura Asset Management and Credicorp Capital supplied a 19-year, UVR-denominated loan for 300 billion pesos. "There was a lot coming to market at the same point in time, so we needed a lot of different sources of capital," says Fernando Rivera, a managing director at Goldman Sachs.
The cheapest tranche in the financing package was the UVR bond, which was priced with a 7% coupon to yield 7.8%. The other UVR-denominated debt, a loan from the Credicorp-Sura fund, carried a rate of 7.5% over the inflation-linked units, while the dollar bond priced with an 8.25% coupon to yield 8.5%. "The ability to diversify funding sources lowers the pricing," Greenwood says. But pricing is not everything, and the project sponsors – Mario Huertas Cotes, Meco and El Cóndor – are looking to increase the returns on equity by raising as much debt as possible.
"If the only thing that mattered was the cost of capital, we’d all do six-month loans at 1% over Libor and keep rolling them over," Rivera says. LF
WINNER: Pacífico 3
PROJECT: Pacífico 3
FINANCING TYPE & SIZE: $650 million project financing
BANKS: Goldman Sachs, Bancolombia, CorpBanca, Grupo Sura, Credicorp, Structure Banca de Inversión
LAW FIRMS: Castro Leiva, Clifford Chance, Holland & Knight, Milbank, Philippi Prietocarrizosa Ferrero DU & Uría, Reed Smith, Sullivan & Cromwell Hector Ulloa
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© 2016 Latin American Financial Publications Inc.