White & Case Advises on First Project Bond Financing with EIB Credit Enhancements in Germany for Major A7 PPP Project
Global law firm White & Case LLP has advised the joint lead arrangers, lenders and institutional investors, on the first project bond with European Investment Bank (EIB) credit enhancement in Germany, for the financing of the extension and operation of the A7 federal highway between Hamburg and Bordesholm in the Federal State of Schleswig Holstein. The project, which is the largest PPP project to have been launched in Germany with construction costs of around €600 million, was awarded by the Federal State of Germany to the consortium of Hochtief, institutional investor Dutch Infrastructure Fund (DIF) and construction company Kemna with a term of 30 years.
"This transaction adds to the Firm's strong track record advising on landmark PPP projects and enabled us to demonstrate our experience of successfully delivering project bonds," said White & Case partner Florian Degenhardt. "It's the first PPP project financed by project bonds with EIB project bond credit enhancements and bank bridge financing in the German market. Moreover, it is the first combined bank–bond financing in Europe using the EIB project bond credit enhancement."
The complex financing with total value of €770 million consists of senior bonds privately placed to institutional investors purchasing senior bonds successively during the four year construction period to mitigate negative carry, EIB letter of credit as Project Bond Credit Enhancement (PBCE) to mitigate cost-overruns, short-term bank debt for bridge financing of milestone payments pursuant to construction progress and several shareholder loans from the sponsors. Due to the EIB letter of credit, the senior bonds achieved a rating of A3 from Moody's. The combination of project bond and EIB PBCE with milestone bridge facilities led to challenging intercreditor issues.
Societe Generale and Crédit Agricole CIB acted as joint lead arrangers and provided, as lenders, milestone bridge facilities. Bond purchasers were institutional investors from US, Canada and Europe such as European Investment Bank and KfW IPEX-Bank. Deutsche Bank acted as Project Agent for all creditors.
The White & Case team was led by partners Florian Degenhardt (Hamburg) and Gavin McLean (London) and included partners Caroline Miller Smith, Ingrid York (London) for hedging and Bodo Bender (Frankfurt) for tax as well as local partner Veit Sahlfeld, counsels Bernd Schneider and Beate Treibmann and associates Matthias Grigoleit, Lars Petersen, Domenico Schwan, Karl-Alexander Neumann (all Hamburg), Lucy Plowright, Tim Wood, Laurence Coman and Kamran Ahmad (all London).
White & Case partners Joshua Parbhu (London) and Tom Flatten (Frankfurt), together with counsel Michaela Huber (Frankfurt) and London-based associates Ranjit Golar and Laura Spota, advised Deutsche Trustee as bond trustee and security trustee.
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