Online extra: How banks are muscling in on the monolines’ infrastructure business
“Normally, the willingness of the monolines to go long-term means that they are cheaper for long-term funding. But the banks have been pushing the envelope on tenors and prices so this is simply not the case any more”
Investors rap MBIA over Eurotunnel payout
Even if the pipeline of PPP deals in North America does grow as expected, monolines cannot expect the business simply to land in their laps. There is now a very real competitive threat from the banks in this market, and just because the option of a capital markets exit exists doesn’t mean that it will always be used. “Normally, the willingness of the monolines to go long-term means that they are cheaper for long-term funding,” says Francisco Clemente Sánchez, chief financial officer at Cintra, which, together with Macquarie Infrastructure Group, sponsored both the Chicago Skyway and Indiana Toll Road deals. “But the banks have been pushing the envelope on tenors and prices so this is simply not the case any more.”
Last year’s $3.8 billion financing for the Indiana Toll Road has so far seen the debt remain with the lending banks rather than being securitized (the deal was lead arranged by BSCH, BBVA, BNP Paribas, Caja Madrid, Depfa, Dexia and RBS). There is some discussion in the market over the reason for this. The Chicago Skyway financing involved a $961 million Series B tranche that featured an accreting fixed-rate swap under which the project company has only limited cash payments until 2017 – it effectively pays only interest for the first 14 years of the deal.