Syndication returns as €806m ‘French Pentagon’ reaches close

Oaple-Defense, a consortium led by a subsidiary of French construction giant Bouygues, has reached financial close on the public-private partnership (PPP) contract to build and operate France’s new Ministry of Defence, in Balard, a suburb of Paris.

The 30-year project, nicknamed the ‘French Pentagon’, will be able to house 9,300 of France’s senior military officials and ministry of defence employees. The Bouygues-led team, which also includes CDC, FIDEPPP, SEIEF, Sodexo, Thales and Dalkia, beat competition from consortia lead by Eiffage and VINCI earlier this year.

The government will pay the private partner an average of €130 million in availability payments over the asset’s 27-year operating period, amounting to some €3.5 billion over the life of the project. Availability payments are public contributions paid in exchange for making an asset available in good condition.

BBVA, CIC, Dexia, Natixis and SG acted as mandated lead arrangers (MLA) on the deal, providing the consortium with a total of €806 million in debt, including an equity bridge loan. Importantly, the loan will start syndication this month to European banks. Syndication, the process of selling down parts of a loan to other banks, has fallen out of use ever since the financial crisis broke, constraining banks’ liquidity.

The debt provided breaks down into a 4.8-year, €711 million construction loan, paying a margin of 195 basis points; a 4.5-year, €78.39 million equity bridge loan, priced at 150 basis points; and a €16 million revolving VAT facility, paying a margin of 150 basis points.

There are other debt tranches – taking advantage of France’s Dailly law, which allows developers to transfer the availability payments they receive from the government directly to their creditors – which will be used to pay off part of the construction credit and help finance project maintenance. The equity bridge loan will be repaid through an equity injection from the consortium.