NIBC wins European PPP Deal of the Year Award

NIBC won the PFI Award for PPP (Public-Private Partnership) Deal of the Year 2013 with the financing of the penitentiary building in Zaanstad. Below you can read the full text of the press release that PFI issued:

2013 was the year the credit-enhanced structured bond-style came back into the project finance market. ING and NIBC managed to get their first deal done under ING’s Pebble structure and NIBC’s Commute model on the €300m Zaanstad prison in the Netherlands, funded with €195m of debt. The project benefited from public subsidies and the debt/equity ratio will be around 90/10.

A key element of the protection piece debt provided by the commercial banks is that it has a shorter life compared with the long-term debt. The credit-enhancement facility, in fact, is aimed at guaranteeing the riskier construction phase and the beginning of operation, while the long-term management phase is left uncovered. This feature distinguishes the Pebble tool from other private credit-enhancement instruments, which covered a longer period in the life of the asset and made the debt more expensive. The subordinate loan will also be drawn first compared with the institutional tranche, rather than simultaneously.

ING and NIBC provided 15% of the debt as a seven-year first-loss protection subordinated loan to guarantee the other tranche. The subordinated loan is paid back first if the asset is performing, while it is used to absorb losses if the asset underperforms or defaults. After the end of construction, cashflows are directed to pay back the subordinated loan.

The long-term fixed-rate debt accounts for the remaining 85% of the total debt and was provided by institutional investors, both insurers and pension funds. The tenor is over 20 years. Investors from the Netherlands, Belgium, France and Germany signed up for the deal, which did not have an external rating.

Pi2 won a concession to build and operate the Zaanstad prison for 25 years in June. Ballast Nedam (65%) and Royal Imtech (35%) are Pi2’s shareholders. PwC and Allen & Overy advised the sponsors. Stibbe advised the lenders.

The big daddy of the credit enhancement deals this year was the Castor gas storage bond refinancing in Spain, backed by the European Investment Bank’s PBCE product. Unfortunately, the scheme hit some well published problems after financial close. EIB did a further PBCE deal, however, the Gabbard OFTO financing in the UK. FHW Capital credit-enhanced a UK social housing deal in Salford, while Assured, the only monoline insurer left standing, managed to fund three UK PPP deals.

Click here to go to the article on the PFI website.