Infrastructure boom hits capital desert
Governments on both sides of the Atlantic have announced ambitious infrastructure spending commitments. But they will have to negotiate a much-changed bank lending market to realize their plans. Louise Bowman reports.
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WHEN IRISH ENTREPRENEUR Dermot Desmond decided to sell London City Airport in 2006 he was inundated with about 80 expressions of interest. He sold the airport to Global Infrastructure Partners and AIG for £750 million ($1.03 billion) in a deal voted one of the most overpriced sponsor acquisitions of the year in a subsequent industry poll. The deal was financed via a £490 million seven-year bullet loan arranged by Credit Suisse and RBS, which paid 140 basis points over Libor. Sponsors injected £337 million of equity into the unregulated airport, in a deal that was levered at 14 times ebitda. Fast-forward two years and the first proposed privatization of a US airport reveals just how much the financing markets for infrastructure have changed. A consortium of Citi Infrastructure Investors, YVR Airport Services and John Hancock Life Insurance won the concession to operate Chicago’s Midway Airport on a 99-year lease in September 2008.