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CRT: Building blocks of Brazil’s first project finance bond

CRT was a natural candidate to open the project finance bond market in Brazil because the sponsors of Rodovias do Tietê are Atlantia Bertin Concessões (a 50/50 joint venture of Atlantia and Bertin), and Ascendi (a 60/40 joint venture of Mota-Engil and Banco Espírito Santo). They have experience of these structures in Europe.

The R$1.065 billion ($450.77 million) deal is rated Ba2 internationally and Aa2 nationally. The deal was led by global coordinator and bookrunner BTG Pactual, along with bookrunners Banco ABC, Espírito Santo, Safra and Morgan Stanley. This was the toll road operator’s second attempt to price a real-denominated bond following an aborted attempt to sell a R$650 million bond last year in a deal led by Barclays.

The transaction is a 15-year amortizing bond, paying inflation index Ipca plus 8%. The inflation-linked structure matches demand from Brazilian pension funds that seek Ipca-linked paper because their actuarial measures are adjusted by Ipca, as well as for the company-focused reason that its toll road revenues are also adjusted by Ipca. Inflation-linked paper also often appeals to private banking clients that have exposures to inflation.

The structure is the first Brazilian debenture to make use of reserve accounts for capital investment, operation and maintenance, as well as reserve accounts used to fund initial cashflow shortfalls due to a front-loaded work schedule. The deal also employs other features that are common in European and US-based project finance bonds but are novel in Brazil, such as an independent engineering consultant – Arup Brasil Consultoria – which will approve annual expenditure budgets and any expenses other than those of a legal nature.

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