A club of 13 banks successfully closed the Can$1.6 billion debt financing for the Autoroute 30 PPP project in Quebec, Canada in 2008, one of the most important and strategic projects in North American history successfully syndicated in the middle of the global financial crisis.

The project was first mooted in November 2006 when the government of Quebec announced that the western section of highway 30 would be completed under a PPP scheme - and that global requests for qualification had been sent out.

The aim of the project was to contribute to the development of markets in Montreal and the Montérégie region and to provide greater access to markets in Ontario, the Maritimes and the US.

Transport Quebec and Partenariats public-privé Québec (PPP Quebec) teamed up to make sure the project hit the ground running.

The project

The real toll road, to be built under a DBFOM basis involves the construction of 35km section between Châteauguay and Vaudreuil-Dorion. It also involves a 7km section from Ste Catherine to Candiac.

Three consortia were shortlisted for the deal in February 2007, they were:

• Infras-Québec A-30 - Macquarie Bank, Construction Kiewit Cie, Parsons Overseas Company of Canada, Genivar and Miller Paving
• Nouvelle Autoroute 30 - Acciona, Iridium Concesiones de Infraestructuras, Groupe Axor, Acciona Infraestructuras, Dragados, SICE and Arup Canada
• SNC-Lavalin - SNC-Lavalin, Pomerleau, EBC, Rizzani de Eccher, Buckland & Taylor, Tecsult, Dexia and Mainroad

The three teams were then asked to submit proposals that meet the technical and financial requirements for the completion highway with Transport Quebec to release a document outlining its technical and administrative requirements. The qualified candidates had until 26 March 2008 to submit their detailed technical proposals and until 7 May 2008 to submit their financial proposals.

The Nouvelle Autoroute 30 was selected as the preferred bidder in June 2008.

Financing

The Nouvelle Autoroute 30 mandated Banesto, BBVA, La Caixa, Caja Madrid, ICO and RBC as lead arrangers and bookrunners in June 2008. BES and Scotia Capital joined soon after. Banco Popular, Bank of Scotland, DekaBank, HVB Credit and Societe Generale joined just before financial close with smaller commitments. All 13 banks shared mandated lead arranger status.

The total project value was US$1.5 billion with the banks arranging a debt package of US$1.061 billion.

Total equity was US$183 million with a bridge loan of US$269.30 million. The bridge loan has a maturity of 5.5 years. The debt:equity ratio was split at 86:14.

Gowlings Lafleur Henderson provided legal counsel to the sponsors with RBC acting as financial adviser. Ogilvy Renault acted as legal adviser to the banking group.

Fraser Milner Casgrain was legal adviser to the government with financial advice coming from KPMG.

P3s in Quebec

The three key provinces involved heavily in the P3 market are British Columbia, Ontario and Quebec. Each one has set up a special organisation or corporation to deal with P3 opportunities.

BC had a head start over the other provinces as it established its organisation over six years ago. Ontario and Quebec set up their agencies in 2005, and though Ontario announced over 20 projects for development over the next few years, Quebec decided to take things slowly.

Quebec is the last big province to use P3s, successfully implementing private sector participation in a number of social infrastructure/transport projects. But it still has a long way to go as its aging infrastructure means a Can$37.5 billion spend is forecasted over the next five years.

So far the projects which have reached financial close are:

• Autoroute 25  - FC in September 2007
• Autoroute 30 - FC in September 2008

Those that are in the RFQ/RFP stage are:

• Montreal Concert Hall - three shortlisted bidders
• McGill University Health Centre - two shortlisted bidders
• Centre hospitalier universitaire de l'Université de Montréal  - two shortlisted bidders, RFP launched
• Purchase of 200 residential and long-term care units in Montérégie  - four shortlisted bidders, RFP issued
• Québec Service Stations - FC in July 2008
• Modernisation of Quebec City's Hôtel-Dieu  Hospital - RFP to be launched
• Turcot Interchange in Montreal  - RFQ to be launched in June 2009

Conclusion

Despite trying circumstances and difficult credit markets, the deal bypassed a terrible syndication market by assembling a club upfront and using a generous flex price and this combination may well be used for future projects when bringing them to financial close.

Quebec is a growing market with great opportunities for the future, it has a number of roads that were built in the 1960s and which are now in need of repair so anticipation is high that the transport market will bring further opportunities.

Canada has a thriving (and emerging) P3 sector and is clearly here to stay. During a time of economic gloom, P3s present a ray of hope and safety for investors, because there is often direct or indirect government backing available, so the market should continue to remain an attractive proposition in the years to come.

The project at a glance