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Investment Partnerships Program - PPI

Financial conditions for airports projects

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22 de dezembro de 2016

Financial conditions for airports projects

Airport

Objective

To support the expansion and/or modernization of airport infrastructure in connection with the auctions that will be held by the Agência Nacional de Aviação Civil (“ANAC”) in the first semester of 2017. These conditions apply to the following airports: Salvador, Florianópolis, Porto Alegre and Fortaleza.

Who can be financed

Corporations based and managed in Brazil (the “SPV”).

What can be financed

The expansion and/or modernization of the infrastructure of the following airports: Salvador, Florianópolis, Porto Alegre and Fortaleza.

The conditions herein established will apply to all items that are financed in connection with the expansion/modernization of these airports’ infrastructure, including the acquisition of equipment.

Minimum Loan Amount

R$ 20 million. For smaller pledges, the applicable product is BNDES Automático.
 

Interest Rate

Direct Support (financing directly with BNDES)

Total Interest Rate = Cost of Funds + BNDES’ margin + Risk Spread, where:

           Cost of Funds = TJLP (Brazilian Long Term Interest Rate, established by Law nº 9.635/96);

           BNDES’ margin = 1.5% p.a.

           Risk Spread = up to 3.37% p.a., according to the customer’s / project’s credit risk.
 

Indirect Support (finance done by intermediation of commercial banks)

Total Interest Rate = Cost of Funds + BNDES’ margin + Financial intermediation rate + Commercial Bank Spread, where:

           Cost of Funds = TJLP (Brazilian Long Term Interest Rate, established by Law nº 9.635/96);

BNDES’ margin = 1.5% p.a.

           Financial intermediation rate = 0.5% p.a.

           Commercial Bank Spread = to be negotiated between the customer/project and the commercial bank

Additional fees applicable to BNDES’ loans are listed here (in Portuguese).

Financial Conditions’ Applicability

The TJLP’s cost of funds will be available only for the first cycle of mandatory investments in the airport infrastructure, with a deadline defined by the Airport Exploration Plan (“PEA”, in Portuguese) of the concession contract. Moreover, the construction of the second runway of the Salvador Airport, which will be mandatory once a specific demand level is reached, can also be financed with the TJLP’s cost of funds.

 

BNDES’ Maximum Participation

Up to 40% of the Eligible Items. At least 20% of the project will have to be supported by equity.

Loan Term

Up to 15 years, including grace period.

There will be an initial amortization grace period of up to 6 months after the end of each investment tranche. Each tranche scope will be defined by BNDES according to the investment phases of the concession contract.

Amortization Schedule

Constant amortizations.

Debt Sizing

The maximum allowed debt amount will be determined considering each project’s cash generation. The project shall be able to maintain an annual DSCR of at least 1.30, after the payment of the fixed concession fee, according to BNDES criteria.

Security

The loan will be structured either as a corporate finance or as project finance, according to BNDES’ rules applicable to each category and may include the definition of a physical-financial completion.

The securities will be determined after the consideration of the technical-economic analysis of the Project and of the stakeholders, and may include:

Pre-Completion Securities

  • corporate guarantee or stand-by letter of credit;
  • pledge over SPV shares;
  • pledge or fiduciary ownership over the emerging rights of the concession;
  • pledge or fiduciary ownership over the project and accounts receivables;
  • security deposits of at least 3 times the debt service; and
  • insurance package, which shall name the creditors as loss payees, which shall include, at least, the insurances demanded by the concession contract.
  • Observation: When a stand-by letter of credit for the total outstanding debt is issued, the relevant financial institution will have priority accessing other project security. 


Post-Completion Securities

  • pledge over SPV shares;
  • pledge or fiduciary ownership over the emerging rights of the concession;
  • pledge or fiduciary ownership over the project and accounts receivables;
  • security deposits of at least 3 times the debt service; and
  • insurance package, which shall name the creditors as loss payees, which shall include at least the insurances demanded by the concession contract.


Notes:

  1. The project securities will only be shared with other debts related to the financing of the CAPEX of the project. The security will not be shared with any debts in connection with the concession fee payment.
  2. A loan structured as a Project Finance will reach financial completion after achieving a DSCR of 1.30 or higher and an equity ratio of 20% or higher. The calculation of the DSCR and the equity ratio for the fiscal year t will be done according to the following formulae:


EBITDAt = Operating Income + Depreciation & Amortization + Financial Expenditures – Financial Income +/- Equity Pick-Up +/- Impairments, for year "t"

Taxest = Income Taxes (IRPJ) and Social Contribution over the Net Result (CSLL) due according to the SPV profit for the year "t".

The year “t” is the one in which the covenants are calculated and the year “x” is the one between “t” and the loan repayment in which the sum of the debt service and the concession fee reaches its highest value. In order to evaluate the financial completion, the covenants will be calculated yearly after the release of the audited financial results for the year “t”. The values for upcoming years will be converted to real values (based on “t” values) using Brazil’s Central Bank inflation expectations.



In the case of indirect support, the security package will be negotiated between the commercial bank and the customer.

Disbursements

BNDES’ disbursements will occur periodically, in an amount equal to the product of BNDES’ participation in the project's eligible items and the amount invested in eligible items, within each period.

Infrastructure Bonds

Besides the loans extended under the financial conditions herein presented, BNDES might also subscribe up to 50% of the infrastructure bonds emitted under Brazilian law by the SPV to finance the project’s implementation.

Additional Requirements

The BNDES loan agreement will include corporate governance obligations, such as rules related to transactions with related parties (“TRP”), which will at least include:

  • TRP above a pre-defined amount will be subject to approval by the SPV’s Board of Directors (the “Board”), excluding members with potentially conflicting interests;
  • The Board shall consider at least three proposals, with corresponding values and quantities, by companies with similar know-how before approving a TRP;
  • The Board shall have an independent committee to support the analysis of each TRP. The independent committee shall provide an opinion with its favorable or not favorable conclusion about each TRP.
  • The minority shareholders with at least 5% of the voting shares shall have the right to request an opinion by an independent entity, which shall be paid by the SPV.
  • The SPV shall disclose every TRP approved by its Board, which shall also be published in the quarterly financial results.
  • The fulfilment of TRP obligations shall be attested to by a yearly external auditor, to be paid by the SPV.

The SPV shall disclose the airport’s monthly operational data, as deemed reasonable by BNDES, and its quarterly financial results in its website.

The SPV shall hire an external engineering manager / certifier satisfactory to BNDES who shall act in the interest of the creditors (including the bondholders). The manager / certifier shall provide reports about the reasonability of the capital expenditure and of the service providers, the construction progress, the fulfilment of the obligations under the concession agreement, the risk management of the project and the technical analysis of the events that might result in requests for changes in the concession contract.

Private equity funds (“FIPs” in Portuguese) holding shares of the SPV will additionally have to:

  • Approve, in the FIPs’ Investment Committee, the necessary amounts to fulfill its commitment to the Project , as well as an extra 30% of the inital amount for eventually necessary additional support;
  • Disclose the holders of the FIPs’ quotas and its management team;
  • Disclose the FIPs investment rules.


Debt Availability

This document states indicative financial conditions to the winners of the auctions to be held by ANAC in the first semester of 2017, for the Salvador, Florianópolis, Porto Alegre and Fortaleza airports, and are not intended to create and do not create any legally binding obligation or commitment by BNDES.

After signing the concession contract, the SPV will be responsible for submitting an application for a BNDES loan, which will run its own credit / KYC analysis of the SPV, its shareholders and potential guarantors, and of all legal, financial and environmental aspects of the submitted project.

How to apply

The loan applications should be mailed directly to BNDES by the SPV or to one of the registered financial institutions, following the standard form, to:

Banco Nacional de Desenvolvimento Econômico e Social – BNDES
Área de Planejamento e Pesquisa – APP
Departamento de Prioridades – DEPRI
Av. República do Chile, 100 – Protocolo – Térreo
20031-917 – Rio de Janeiro – RJ

Source: BNDES

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