SA Health Partnership closed financing for the A$2.88 billion ($3.06 billion) new Royal Adelaide Hospital concession on 6 June 2011. The deal is notable for the impressive 15-bank club that participated in the debt, despite the backdrop of an escalating Eurozone crisis. It was also the largest public-private partnership in the state of South Australia and largest healthcare PPP ever in Australia.

The 35-year design-build-finance-operate concession includes replacing the existing Royal Adelaide Hospital with a new 800- bed facility, and providing it with equipment. The new hospital will be able to handle up to 80,000 same-day and overnight admissions per year. SA Health, which includes InfraRed Capital- managed AU Investments (30.58%), John Laing (17.26%), Lloyds-managed Uberior Infrastructure (17.26%), Leighton Infrastructure (19.9%) and Macquarie Capital (15%), is also responsible for non-clinical services during the operational phase. The hospital is located on a former rail yard next to Adelaide’s main railway station in the centre of the city.

ANZ, BBVA, Bank of Ireland, BOS International, Credit Agricole, DBS, HSBC, ICBC, ING, Intessa Sanpaolo, Investec, National Bank of Australia, Banco Santander, Societe Generale and WestLB provided the A$2.51 billion club loan for the project. The seven- year debt is fully amortising during operations, with a two-year tail. It priced at 260bp over BBSY during construction, before dropping to 245bp over BBSY once operations start. The sponsors swapped the interest rate to a fixed rate at close to minimise the risk of adverse base rate movements, but expect to refinance the deal in year five. The sponsors provided A$373 million in equity.

The state of South Australia will make quarterly availability payments to the consortium, beginning at substantial completion. The state is making service payments, which include capital, non-clinical operating, and life-cycle costs, of A$397 million per year on average over the operational term of the concession.

Michael Schur, chief executive of SA Health Partnership and head of PPP services at Leighton Contractors, said that the major issues that the consortium faced arranging the debt included raising A$2.5 billion amid market instability and coordinating with a bank group of 15 lenders. He added that the lack of public sector financial support during the construction phase was a first for a deal of this size in the Australian market.

The state awarded the concession to SA Health in December 2010. The consortium beat Torrens Health Partnership, which included Baulderstone Hornibrook, Bilfinger Berger, Bovis Lend Lease, ISS Health Services, Lend Lease Australia and RBS. Plenary had also submitted an expression of interest in July 2009 but dropped out of the procurement before the request for proposals was released in November of that year. The state released the request for EOIs in June 2009, but had planned to replace the hospital for several years before that, and committed to the project in 2007.

A Hansen Yunken (50%) and Leighton Contractors (50%) joint venture is the engineering, procurement, construction contractor. Construction began in September 2011 and is scheduled to be complete in 2016. Spotless is the facilities management provider.

SA Health Partnership
STATUS: Closed 6 June 2011
SIZE: A$2.88 billion ($3.06 billion)
LOCATION: Adelaide, South Australia
DESCRIPTION: 35-year DBFO concession of an 800-bed replacement for the Royal Adelaide Hospital GRANTOR State of South Australia SPONSORS InfraRed-managed AU Investments (30.58%), John Laing (17.26%), Uberior Infrastructure (17.26%), Leighton Infrastructure (19.9%) and Macquarie Capital (15%) EQUITY: A$373 million
DEBT: A$2.51 billion
LEAD ARRANGERS: ANZ, BBVA, Bank of Ireland, BOS International, Credit Agricole, DBS, HSBC, ICBC, ING, Intesa Sanpaolo, Investec, National Bank of Australia, Banco Santander, Societe Generale and WestLB
SPONSORS’ FINANCIAL ADVISER: Macquarie Capital
GRANTORS’ FINANCIAL ADVISER: Ernst & Young
SPONSORS LEGAL COUNSEL: Freehills
LENDER LEGAL COUNSEL: Allens Arthur Robinson
GRANTOR LEGAL COUNSEL: Clayton Utz
EPC CONTRACTORS: Leighton Contractors and Hansen Yunken joint venture ACCOUNTING AND TAXATION ADVISER: KPMG
FINANCIAL MODEL AUDITOR: Mercer
INSURANCE ADVISER: March
INDEPENDENT TECHNICAL ADVISER: Altus Page Kirkland