UK: Lovells Advises On The First Monoline Wrapped EIB And Bond Financing For A Portuguese Project
Last Updated: 17 August 2001

Lovells advised the European Investment Bank on the first monoline wrapped EIB and bond re-financing of a Portuguese shadow toll road (or SCUT) project. US monoline insurer XL Capital Assurance Inc. provided the AAA rated financial guarantees for the EIB loan and the bond issue. With a tenor of 26 years the financing represents the first long-term Euro infrastructure bond in continental Europe.

The original commercial bank financing for the Algarve shadow toll road project was put in place in May 2000.

The re-financing of the Algarve project consists of a euro130m loan from EIB, a euro126.5m bond issue and a working capital facility of euro25 million provided by Banco Santander Central Hispano and HypoVereinsbank. The EIB loan, the bonds and the working capital facility all benefit from an AAA rated financial guarantee from the US monoline insurer, XL Capital Assurance Inc.

The main Project sponsors are Cintra Concessiones de Infraestructuras de Transporte, Sociedad Anónima and Ferrovial-Agroman, S.A. which are both part of the Spanish group, Grupo Ferrovial. The Portuguese project company, Sociedade Concessionaria da Scut do Algarve, S.A. ("Euroscut"), was awarded the concession for the project in April 2000. Euroscut was also the borrower under the May 2000 financing. Due to, among other things, the Portuguese securities law restrictions on the level of gearing required of companies issuing bonds, the re-financing was undertaken through a Dutch special purpose vehicle, Algarve International BV. Algarve International BV (which is owned by the same group of shareholders as Euroscut) issued the bond and is the borrower of the EIB loan and the working capital facility. The proceeds of the bond issue, the EIB loan and the working capital facility are to be on-lent by Algarve International BV to Euroscut under the terms of an inter-company loan agreement.

The Algarve project is the first Portuguese toll road out of the seven which have reached financial close since December 1998, to be re-financed using an EIB loan and bond issue combination.

The Lovells team was led by Shibeer Ahmed who was assisted by Jonathan Gay in London and David Alberts (who is partner in Lovells, New York) on New York law issues.

Due to its complex cross-border nature, the transaction involved a large number of law firms providing, English, Dutch, NY, Spanish and Portuguese legal advice. Lovells (London and New York) acted for EIB, Freshfields (Madrid and Amsterdam) acted for Euroscut and Algarve International BV, Slaughter and May (London) acted for the Lead Manager and the Bond Trustee and Debevoise & Plimpton (London and New York) acted for XL Capital Assurance Inc.

Shibeer Ahmed said today:

"The re-financing represents a ground breaking transaction because it is the first bond financing for the Portuguese project finance market (which is the second largest in Europe, in terms of funds raised, after the UK), it is the first long term infrastructure bond deal in continental Europe (26 years compared with previous longest which was 15 years) and it marks the entry of XL Capital Assurance into the European project bond market. I expect that a number of the existing and proposed Portuguese toll road projects will be financed or re-financed using a structure similar to that adopted for the Algarve project".

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