The €700 million (US$875m) Tribunal de Grande Instance, or Court of First Instance, PPP project in Paris is one of France's largest justice projects yet, if not one of the largest globally.

Efficiently procured and well financed, the accommodation project stands out in the entire social infrastructure sector. That said, France is no stranger to large social infrastructure projects, just a year back the country reached financial close on the €1 billion Pentagon project.

The Pentagone à la française - located at Balard in Paris - was one of the largest defence infrastructure deals to close globally in 2011 alongside Australia's US$944 million military housing PPP - Single LEAP Phase 2 [Transactions Database]. The Pentagon project was also crowned social infrastructure project for the year at the IJ Awards ceremony held earlier this year.

While the Paris courthouse project tied its sponsors and banks to strict deadlines, the procurement process was smooth for the most part even though it belongs to the confidentiality-centric justice sector.

The project brought together seven international lenders, including one domestic bank, which achieved financial close on the project in just over two months after the preferred bidder was selected.

Experts say that the courthouse is a good example for further French accommodation projects to follow. The French market is indeed one of the more active PPP players among its western European peers. The country has a healthy pipeline of social infra projects, including several prisons and university rebuilds, that are presently in procurement.

The Project

France brought the courthouse rebuild project to the market in 2009 and got good response from bidders for it. In the final competitive dialogue rounds French majors Bouygues and Vinci - each supported by infrastructure funds - were competing against each other for building the modern courthouse [Projects Database].   

Best and final offers were received in September 2011 and a preferred bidder was picked the following month.

Bids were required to have 100 per cent lender backing, said one source and therefore all bids had full support from banks. There was good appetite for the project from the market and even though the euro zone crisis altered the bank club a month before close, seven banks diligently brought the project to close.

Sponsor Bouygues - which was chosen preferred bidder in November 2011 - was also supported in its consortium by Dutch Infrastructure Fund (DIF) and Lloyds Bank European Infrastructure Partners LP (LBEIP). The total equity was split between them as:

• Bouygues – 20 per cent
• DIF - 35 per cent
• LBEIP – 45 per cent

The project was also Lloyds' floated equity fund LBEIP's first investment in the French PPP market.

The project - which is to begin construction by the end of this year or early next subject to  construction permit- will see construction of a completely new court building in the form of a skyscraper about 160 metres tall with a full glass exterior symbolising the court's transparency and accuracy in justice.

The building is being crafted by renowned Italian architect Renzo Piano, who was also responsible for the city’s Centre Georges Pompidou.

The new modern courthouse building will house around 90 courtrooms and is expected to be visited by 8,500 people daily. Alongside the PPP building, the Clichy-Batignolles area around the courthouse is also expected to eventually see development of 34,000 homes, 140,000 m2 of office space and around 70,000 m2 of shops and other public facilities.

The new courthouse building is expected to be fully operational by 2016.

Financing

A mix of bank debt and equity from Bouygues and two infrastructure funds brought the landmark French justice PPP to a close on 15 February 2012 which was the "absolute deadline" set by the Government for the close.

Total debt on the project is €675 million (US$880.2m) which is split as follows:

• Construction loan - €595 million
• Equity bridge loan - €65 million
• VAT facility - €15 million

A total of seven banks provided debt with tickets ranging between €70 million to €125 million. The total loan is being provided as a 30-year door to door facility. The debt will be refinanced after the five year construction period with a €554 million Dailly tranche and another €41 million project debt tranche.

The lending group comprises:

• BBVA
• BayernLB
• BTMU
• HSBC
• NordLB
• Société Générale
• SMBC

The margins on the debt for the project are geared at 250bps during the construction period and will be stepped upto 300bps after year 10. Margins for the Dailly tranche debt will be around 170bps.

While the French Pentagon was majority financed by French lenders, with three foreign banks joining at the syndication stage, the Paris courthouse's international lender driven bank club reflects a growing trend in French and wider European market.

One of the bankers closely involved in the deal is of the view that, "At the moment Japanese and German banks are able to provide longer-term liquidity compared to other European banks."

"Japanese and German majors are also being seen as emerging leaders on the pricing front in the French market," the banker added.

The future pipeline of prison and university projects in France is also being keenly looked at by these banks.

The project's accommodation model will be replicated by future social infra projects although single projects of this size will be hard to come by in the European market.

Advisory roles

KPMG was financial adviser to the authority, DS Avocats provided legal counsel. COTEBA acted as technical adviser.

Salans gave legal advice to the lenders, Mott MacDonald acted on the technical side and Marsh gave insurance advice.

Market outlook

France has procured some of the largest social and transport infrastructure deals globally in the past few years. While it is still being speculated upon what newly elected President François Hollande's view on infrastructure spending will be, the country still remains an active key player in the project finance space.

As mentioned, a justice project of the size of the Paris Courthouse may not be replicated in the near future but the project is a good example for the future ones to follow.

The country has about ten university projects and eight prisons in planning and some in procurement. While they may range between €100-200 million, the good news is that there is appetite and it has surely got Japanese and German lenders excited.