Momentum Trains seals rolling stock PPP financing
Momentum Trains – a joint venture between Pacific Partnerships (48%), CAF Investment Projects (26%) and DIF Infrastructure V (26%) – sealed a DFI-backed rolling stock financing last month for the A$1.26 billion ($853 million) Regional Rail PPP in New South Wales (NSW), Australia. The pathfinder deal continues innovation for Australian project finance, which since the financial crisis had been dominated by mini-perms and the big four Australian banks.
The PPP concession involves the design, build, financing and maintenance of a new fleet of 117 rail cars and a new maintenance depot in Dubbo, in order to replace the ageing 110-passenger car NSW XPT, XPLORER and Endeavour regional fleet. The first trains should be delivered from 2023.
Momentum Trains signed the concession agreement on 14 February 2019 and reached financial close the following day. TXF understands equity commitments are around A$114 million.
The financing comprises a A$1 billion seven-year senior term loan priced at a fixed margin of 150-200bp over Bank Bill Swap Bid Rate (BBSY) and a A$29 million debt service reserve facility. Lenders on the deal are MUFG (largest ticket), CaixaBank, HSBC, Korea Development Bank, and Societe Generale. Banks started syndication at the end of February.
The state government has been able to keep its availability payments per month at a similar size to a much longer concession. But, at the end of the 15-year Operation & Maintenance concession period, the grantor may end the concession and make a large expiry payment to the project company to reimburse all its principal outstanding debt (feasibly around half the A$ 1 billion), which puts lenders' minds at ease. Alternatively, the state government enjoys the discretion to extend the concession (in five-year increments out to 35 years) if that offers better value than returning the project to the market at that time.
The disparity with the equity repayment schedule raised creditors' nerves though, as all equity principal and the associated returns would be repaid by the end of the 15-year minimum operating period. In short, equity commitments will be repaid before the debt.
NSW has gained flexibility on the concession term and the structure may appear on new PPPs – and not just for rolling stock. Herbert Smith Freehills provided legal counsel to Momentum Trains, while King & Wood Mallesons acted for the lenders. MUFG advised the sponsors on the financial side.
