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Vinci closes world’s biggest rail concession

A consortium led by Vinci has raised €3.8 billion in debt and equity from ten banks to reach financial close for the €7.8 billion Tours-Bordeaux high-speed rail line, in France.

It’s been a long time coming, but after almost four years in procurement, French rail agency RFF’s €7.8 billion Tours-Bordeaux high-speed rail line, the world’s largest rail concession, according to a statement from the concessionaire, has reached financial close.
 
The high-speed line will connect the western cities of Tours and Bordeaux over 302 kilometres. Construction will take about six years, with the journey time between Paris and Bordeaux to be cut to just over two hours once the line is operational.
 
The 50-year contract had been awarded last year to a consortium including French infrastructure group VINCI (33.4 percent), CDC Infrastructure (25.4 percent), the infrastructure arm of state-backed bank Caisse des Depots, investor SOJAS (22 percent) and funds managed and advised by AXA Private Equity (19.2 percent). 
 
Nine commercial banks including BBVA, BNP Paribas, Credit Agricole, Dexia, Mediobanca, Santander, Societe Generale, SMBC and Unicredit, together with the European Investment Bank (EIB), have backed the consortium with a total of €3.8 billion in debt and equity. 
 
On the equity side, the consortium will contribute €772 million from their own funds and equity bridge loans provided by commercial banks and the EIB. The commercial bank portion equates to a 6-year, €386.8 million loan paying 225 basis points over EURIBOR, the European interbank lending rate.
 
The commercial senior debt portion breaks down into a 27-year, €1.06 billion loan guaranteed by the French government – paying margins of between 145 basis points and 175 basis points over EURIBOR – and a 27-year, €612 million non-guaranteed commercial loan – paying margins of between 300 basis points and 430 basis points. Both loans are cash-swept, requiring the developers to channel part or all of a project's free cash flows to service debt at a certain point in time, encouraging early refinancing.

Tours-Bordeaux is the first French project to make use of the government’s guarantee for privately financed projects, launched during the financial crisis. This is because Tours-Bordeaux, unlike other deals that are part of France's high-speed rail programme, is exposed to traffic risk. The guarantee can cover up to 80 percent of the debt used for these projects and adds between 75 basis points and 150 basis points to the debt portions it covers, to encourage a speedy refinancing.
 
The EIB is onboard for its biggest ever French loan amounting to a total of €1.2 billion, including debt, equity and a loan guarantee on TEN-T (LGTT) projects. The debt portions provided by the EIB include €400 million guaranteed by the French government and €200 million of unsecured debt.
 
Savings managed by Caisse des Depots, the Fonds d’Epargne, round off the debt package with a 40-year, post-construction loan of €757 million. The French government is also contributing €3 billion for the project with RFF providing the remaining €1 billion.