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Millau Viaduct Reaping the divid

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					                                        Deals of the Year 2007 EMEA
                                                                     features of a project financing and a leveraged acquisition
                                                                     financing. The deal comprises two tranches loaned to the finco
European Transport Refinancing                                       Verdun Participations 2 (VP2) – a Eu430 million 44-year
                                                                     commercial loan lead arranged by Depfa and Dexia, and a
Deal of the Year 2007                                                Eu143 million 30-year loan from the EIB. Both facilities are
                                                                     French CPI index-linked and include a 10-year grace period. All-
Millau Viaduct:                                                      in pricing on the deal is around 70bp – very competitive given
Reaping the dividend                                                 Millau has a toll based income stream.
                                                                        Wrapped to triple-A by Dexia-owned Financial Security
The Eu573 million ($1.14 billion) Millau                                                    Assurance (FSA) and MBIA, Standard &
Viaduct refinancing must bring a smile to                                                   Poor’s also gave the deal a recovery
the faces of the board members at sponsor                                                   rating of 2 (in the event of a default the
Eiffage – not because it raised the longest                                                 rating agency expects a considerable
PPP debt tenor (44 years) in France to                                                      amount of the debt to be repaid). Lenders
date, nor that it is the first index-linked                                                 could also take comfort from relatively
wrapped bank debt for a French infra-                                                       predictable cashflows generated by the
structure project; mere trifles. No, the                                                    project given the Viaduct has been in
pleasure comes from releasing a signifi-                                                    operation since 2004.
cant dividend from a project that was so                                                       The new deal is structured with a
technically challenging it was deemed, by                                                   downstream loan from VP2 to the project
many analysts, a risk too far rather than                                                   company Compagnie Eiffage du Viaduc
an opportunity.                                                                             de Millau (CEVM) that is smaller than
   The project is a global landmark piece of                                                the amount borrowed, thus accounting
infrastructure – both the tallest road bridge                                               for Eiffage’s dividend. Lenders do not
and the longest cable-stayed deck in the                                                    have direct recourse to CEVM and are
world. Designed by UK architect Norman                                                      therefore reliant on dividend and interest
Foster the Viaduct spans 2,460 metres                                                       payments from CEVM to the holding
across the valley of the River Tarn near                                                    company, as well as repayment of the
Millau in southern France.                                                                  principal on the original inter-company
   The bridge forms the last link of the A75  Despite the glamour of                        loan from Eiffage.
autoroute, (la Meridienne) from Clermont-                                                      High leveraging was one of the
Ferrand to Pezenas (to be extended to          the asset, Eiffage was                       weaknesses highlighted by S&P’s analysis
Beziers by 2010). The A75, with the A10
and A71, provides a continuous high-speed
                                                 perceived as highly                        of the deal at the time, with debt to
                                                                                            EBITDA of 25.9x at June 2007. The
route south from Paris through Clermont-       exposed to the risk of                       dividend lockups are also relatively low,
Ferrand to the Languedoc region and                                                         with triggers at 1.35x during the initial
through to Spain. The bridge has a high       failing to complete the                       10-year grace period and 1.17x during
tourist traffic volume heading to southern
France and Spain because the route is direct
                                                  project within the                        the principal repayment phase. Also, as
                                                                                            the lending is to VP2 and includes the
and without tolls for the 340km between        three-year-and-three-                        amount of the dividend, the recourse the
Clermont-Ferrand and Pezenas, except for                                                    lenders will have to the project itself is less
the bridge itself.
                                                  month contractual                         than the full amount of the loans.
   Eiffage won the project tender in 2000     deadline. Consequently                           Mitigating these risks, the project has a
beating off rival bids from Dragados with                                                   fully funded debt service reserve account
Skanska and Bec; the Societe du Viaduc             limited recourse                         and the length of the concession tail
de Millau consortium comprising ASF,
Egis, GTM, Bouygues Travaux Publics,
                                                financing was not an                        should help ensure a full debt recovery in
                                                                                            the event of the borrower defaulting.
SGE, CDC Projets, Tofinso and Auto-            option and the Eu400                            Traffic risk is also diminished by the
strade; and a consortium led by Generale                                                    fact that the bridge is the only tolled part
Routiere with Via GTI, Cintra, Nesco,            million debt for the                       of the A75 motorway, while the seasonal
Acciona et Ferrovial Agroman. Eiffage’s
concession to collect tolls runs until 2080
                                              original 2001 financing                       nature of the traffic is helped by the fact
                                                                                            that tolls go up by Eu2 in July and
although, if the concession is excessively        was in the form of                        August. Moreover, the fact that the debt
profitable, the French government can                                                       is index-linked provides a natural hedge
assume control of the bridge in 2044.            shareholder loans.                         as revenues and operating expenditure
                                                                                                                                              www.projectfinancemagazine.com




   Despite the glamour of the asset, Eiffage                                                both increase in line with CPI. ■
was perceived as highly exposed to the risk of failing to complete
the project within the three-year-and-three-month contractual        Millau Viaduct
deadline. Consequently limited recourse financing was not an
                                                                     Status: Closed 13 July 2007
option and the Eu400 million debt for the original 2001 financing
                                                                     Debt: Eu573 million
was in the form of shareholder loans, which Eiffage funded
                                                                     Location: France
through a corporate loan arranged by BBVA, CIC, Credit
                                                                     Description: Toll bridge refinancing
Agricole and Societe Generale.
                                                                     Sponsors: Eiffage, CDC
   Six years later, and with the project completed on time by
                                                                     Financial advisor to the sponsors: Lazard
December 2004, Eiffage received a dividend through a holdco/
                                                                     Lead arrangers: Depfa, Dexia, EIB
finco refinancing structure that backs the sale of a 49% stake in
                                                                     Monolines: FSA, MBIA
the holdco Verdun Participation 1 (VP1) to public infrastructure
                                                                     Borrower legal counsel: Linklaters
fund Caisse de Depots et Consignations (CDC).
                                                                     Lender legal counsel: Clifford Chance
   The refinancing took the form of a hybrid, combining the

                                           Reprinted from ProjectFinance March 2008

				
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