The $110 million, 25-year bond issued last April by Peru's
Terminales Portuarios Euroandinos (TPE) to fund the upgrade of
Puerto de Paita is not only the first cross-border bond with
brownfield construction risk in Latin America, it is also the
first ever project bond for a port in the region.
DEAL OF THE YEAR: Project/Infrastructure Financing
Terminales Portuarios Euroandinos Paita $110m 2037 Bond
In the groundbreaking transaction, the borrower - which won
a 30-year concession for the port in 2009 - convinced investors
to take the risks with no guarantees or financial guaranty
TPE raised $110 million from the bond markets in April,
following a lengthy discussion with investors. The resulting
2037 bond was priced at par with an 8.125% coupon, to offer
about 350 basis points more than Peruvian government risk. The
notes are structured with a five-year grace period of interest
payment only before the amortization begins.
Goldman Sachs managed the sale for the BB/BB minus rated
firm, with Scotiabank as co-manager and financial advisor.
In terms of investors, 35% came from banks, 28% from pension
funds, 18% from investment managers and 18% from insurance
companies. Peru-based accounts bought 59% of the deal, US
investors 23%, and non-Peruvian LatAm buyers 18%.
The project bond is the first with construction, demand and
operation risk not to have a guarantee, according to DLA Piper,
which represented TPE. The indenture is structured to allow
future issuance of pari passu notes, to cover future financing
needs during the life of the concession.
Each month, revenues from the port are distributed through
an innovative waterfall of accounts for operations and
maintenance, additional investments, debt service and
construction of the additional stages. The transaction contains
financial flexibility given the liquidity reserves and cash
trap mechanisms built into the structure, according to Fitch
Ratings, with the reserve accounts contributing to offset
cashflow shortfalls in periods of distress.
As with other project bond firsts in LatAm in the past few
years, bankers say the deal represents a broadening of the
capital markets that other issuers can test to meet the
region's infrastructure needs.
The $293 million project consists of a new terminal
construction phase, costing $131 million, which includes
dredging to 13 meters. The concession agreement includes a
second phase for $19.3 million and a third one at $19.8
million, with another $123 million expected to be necessary
during the life of the concession.
The container port in the northwest of Peru has the
second-highest activity in national container movement in the
country. Built in 1966, it largely serves Piura, Lambayeque,
Cajamarca, San Martín, and Amazonas area. TPE is 50%
owned by Portugal's Mota-Engil and 50% by Andino Investment