Best infrastructure and project finance house

BNP Paribas: The French bank has been adept at finding new sources of finance in a tight market and succeeding with difficult deals

Keeping your head while all around you are losing theirs has a great deal to be said for it. With some of the biggest names in project finance pulling back from the market this year, those that are committed to the business and can provide capital have reaped the rewards. Euromoney’s infrastructure and global project finance house for 2009 is BNP Paribas, a bank that has built on its long-standing franchise in this sector this year, originating and closing deals while also repositioning itself for the changed market ahead. “This product is a priority for our institution,” explains Emmanuel Rogy, global head of project finance. “There is a lot of support behind it.” Rogy says that his team is particularly proud of doing difficult deals, and there has been no shortage of those this year. The impact of capital shortages at many banks and the implementation of Basle 2 have forced many project finance lenders drastically to scale back or pull out altogether – the most high-profile examples of which are RBS and HSBC. Those deals that have closed have often been tough to pull together in such a volatile financial environment. “When the market is difficult there is a flight to quality,” says Rogy. He cites the $1.7 billion Al Yah Satellite Communications (Yahsat) deal as an example. This was the first limited-recourse satellite deal in one of the Gulf Cooperation Council states and was closed just six days before Lehman collapsed in mid-September. BNP Paribas was financial adviser to the sponsor, Mubadala Development Company, which is owned by the government of Abu Dhabi. “This satellite PPP was the first of its kind so the technical side was very difficult,” says Rogy. “We could only do it because the financing product was impeccable and very well structured. All the banks were very strict that the structuring had to be there – quality was the differentiating factor for our platform here.” The $1.2 billion financing involved a 14-year term loan, a $100 million standby loan and a $80 million debt service reserve facility. There was also $245 million of equity and subordinated shareholder loans. Fourteen banks joined the deal on a club basis and it was oversubscribed and scaled back.

“We are trying to find a new route between assets and international investors” Emmanuel Rogy, BNP Paribas

“One of the issues that the market faces is the need to find as many sources of funding as possible,” Rogy observes. “Deals need to be replicated to, for example, Islamic finance, bond issues and long-term institutional investors.” He explains that the team now spends 50% of its time sourcing new money. “A few years ago it was a case of needing to find the project, not the money. Now you need to find the money, not the project.”

The disappearance of the monoline guarantors has removed a ready source of long-term funding, particularly for the infrastructure sector, so it is particularly important to find new long-term money. “The traditional route of banks funding and offsetting with the monolines disappeared in mid-2007 so we are trying to find a new route between assets and institutional investors,” explains Rogy. “We are engaging with institutional investors ourselves and this has borne fruit in some existing deals where the assets are already generating cashflows.” An example is the Autoroutes Paris Rhin Rhône (APRR) toll-road deal, a Macquarie-led acquisition that was completed in 2005. BNP Paribas brought 11 institutional investors into the project at the end of last year. “This is a very long-term process,” says Rogy. “We are creating a vehicle to invest alongside investors and they are piggybacking with us on transactions.”

In addition to finding new institutional money, bringing new banks to the market is also crucial. One deal where this paid dividends last year was the Grupa Lotos refinery deal in Poland, for which BNP Paribas acted as financial adviser, initial MLA and Sace agent. “This was an extremely challenging deal in a difficult sector,” explains Rogy. “The textbook of project finance would have said not to do it but we listened to the market and managed to find the right banks and provide comfort for those banks. We got the export credit agencies involved and expanded the universe of banks by going to the regional banks rather than the traditional project finance banks.”

Rogy is confident that the integration of BNP Paribas’ project finance offering will keep the bank ahead of the market. In addition to the advisory and arranging practice, the bank has bond and M&A capability relating to project finance. A dedicated team has been set up on the bond side to concentrate on project finance and is jointly executing a UAE gas project deal with the project finance team.