As a result of more than a £200 million financing deal, one of the country's major highways, the A13 from the City eastwards to the M25, will fall to a private consortium with a record for strong ownership and maintenance of roads in the UK.
The Highways Agency, who signed the deal on 12 April, was advised by KPMG Corporate Finance, a leading adviser in the PFI market to both public sector authorities and private sector bidders. Mr Mike Harlow, KPMG Corporate Finance said that the deal was a first in a number of ways. "It is the first PFI road project to incorporate an index-linked bond and secondly, the new payment mechanism will be based primarily upon the availability of the road to motorists rather than traffic volume. This will include incentives to keep the road open during construction and maintenance and to improve safety features."
The Highways Agency signed the 30 year PFI project with Road Management Services plc, a private sector consortium jointly owned by AMEC Investments, Alfred McAlpine, Brown & Root and Dragados Concessions. KPMG Corporate Finance advised the Highways Agency on all commercial and financial aspects of the project, which will be funded by a package consisting of a mixture of shareholder equity and subordinated debt, an EIB fixed rate loan facility (£90m) and an indexed-linked bond issue (£111m). KPMG also devised the entirely new payment mechanism for PFI road projects which is expected to be used on future projects particularly urban roads.
The EIB loan and the bond are guaranteed by monoline insurer MBIA. The EIB loan has a 27 year maturity and will be used to fund project costs and limited variations during the 4.5 year construction period. The bond which has a 28 year maturity, was launched in the market yesterday [13th April] and will be used to fund project costs, a limited contingency and also some costs in relation to a connected docklands road if this is added to the project at a later date.
For further information please contact your usual KPMG contact.
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