Against the expectations of many in the market, a group of arrangers led by JP Morgan achieved a remarkable feat of financial engineering this year with the closing of Italy’s first project bond for a greenfield motorway.
The €2.3bn Pedemontana Veneta motorway in north-eastern Italy, sponsored by Italian construction group Fininc and Spain’s Sacyr, is the first availability-based road deal in the country.
The €1.57bn of notes issued to finance its construction are Europe’s largest project bond issue to-date without relying on multilateral credit enhancement such as the EIB’s PBCE.The whole financing package was largely provided by private investors, with limited involvement by multilaterals.
JP Morgan was the global coordinator and worked with Akros, Intesa Sanpaolo and Santander as co-global coordinators and Kommunalkredit as joint bookrunner.
Distributing the €1.22bn 30-year 5% senior tranche and the €350m 10-year 8% mezzanine tranche was no simple task, considering many investors’ reluctance to take construction risk in Italy and the risk of pending litigation.
Eventually, the deal attracted more than 30 investors with tickets ranging from €0.5m to €225m, without having to rely on a handful of names with deep pockets.
The bonds were bought by asset managers, insurers, pension funds, and others from Germany, Italy, Australia, France and other countries.Australian investor Westbourne Capital and the EU-sponsored Marguerite fund were the two largest investors in the mezzanine tranche.
The 94km motorway between Vicenza and Treviso is 30% complete and the sponsors will complete the work under a lump-sum turn-key EPC contract, while providing €430m of equity.They will then operate the road under a 39-year concession. The motorway will be tolled but the Veneto Region will take traffic risk, as well as providing some €900m of upfront subsidies.
Ashurst was the issuer’s main legal adviser and White & Case was the underwriter’s main legal adviser.
Simmons & Simmons advised the sponsors and Chiomenti advised the underwriters on administrative law. Arcadis was the technical adviser, Marsh the insurance adviser and Bishopsfield Capital Partners acted as project adviser.