Bond of the Year: Paraguay’s Bioceanico Highway

SPONSOR: Consorcio Corredor Vial Bioceánico
LOCATION: Paraguay
FINANCING TYPE & SIZE: $732 million project bond
BANKS: UBS LAW FIRMS: Clifford Chance, Mayer Brown, BKM Berkemeyer

In May, Consorcio Corredor Vial Bioceánico, a toll road concessionaire in Paraguay owned by Brazil’s Queiroz Galvão and the local builder Ocho A, sold 15-year $732m Euroclearable bonds.

“The success of this transaction is the result of extraordinary collaboration between the Government of Paraguay, Ocho A, Queiroz Galvao and UBS”, according to Juan Carlos Betancur, Executive Director of Structured DCM Americas at UBS, which led the deal as sole bookrunner.

The transaction is the first international bond to finance an infrastructure asset in the country under Law 5074, passed in 2013, to facilitate the use of capital market to fund infrastructure projects.

Under the pass-through structure, the notional and interest payments received by the issuer under the Certificado de Reconocimiento de Pago (CROP) are treated only as principal when paid to the bond holders.

This equates to a pricing of 120bps over the sovereign curve, Betancur says, creating a benchmark for the financing cost of future infrastructure projects in the country.

UBS started working with sponsors Ocho A and Queiroz Galvao in 2016, proposing different potential financial structures when the project was still up for bid.

The consortium’s offer was the lowest, both in terms of construction and financing costs, Betancur says.

The section 2 of the Bioceanico road will help connect Brazil’s Atlantic Coast to Chile’s Pacific Coast. It is expected to be put up for bid next year, likely taking advantage of Law 5074, and tap into a project bond once again, Betancur says.