--Shravan Bhat and Jon Whiteaker
Sigma Fondo de Inversion en Infraestructura recently acquired stakes in two operational wind projects in Peru's Ica province and refinanced them with a $250 million U.S. private placement.
Credit Suisse, which advised Sigma on the acquisition of 51% stakes in the 32 MW Marcona and 97 MW Tres Hermanas projects from ACS Group, was also sole placement agent on the private placement.
The 17-year, fully amortizing notes were placed entirely with AllianzGI in a deal that closed on Nov. 30.
ACS, through its subsidiary Cobra Energía, brought the Marcona and Tres Hermanas projects online in 2014 and 2016, respectively, at a cost of $100 million for the former and $230 million for the latter.
The developer financed the projects in February 2015 with $230 million in 17-year senior project debt provided by U.S. Exim, DEG, FMO, Hyundai Power, Natixis and Proparco on the basis of the projects' 20-year, dollar-denominated concession agreements with the Peruvian government. Corporacion Andino de Fomento provided a subordinated tranche.
The Tres Hermanas contract is priced at $69.00/MWh while the Marcona project earns $65.52/MWh.
Sigma bought its initial 49% stake in the projects in 2016 and is using a portion of the newly raised debt to acquire the remaining interest from Cobra. The rest of the proceeds of the bond will be used to refinance existing long-term bank loans.
“There are a few of reasons why the refinancing makes sense, apart from rates being attractive now," says Jorge Camiña, director of infrastructure debt at AllianzGI. “For one, the original debt was priced with some construction risk. The other reason is simplicity: there is now a single counterparty where there used to be multiple banks. Also, our institutional debt product monetizes the full term of the concession.”
Though there were two co-issuers under the private placement refinancing, only a single set of notes was offered to investors. Even so, both issuers presented separate security packages as well as an independent waterfall account to manage each project’s cash flow.
In order to ensure compliance with the PPAs and concession agreements already in place, Cobra had to avoid cross-collateralization under the combined deal.
“One advantage of our [rule 4(a)(2) private placement] product versus a 144A bond is that we provide certainty," notes Camiña. "A 144A bond takes three to four months to prepare and you do a market discovery exercise when you go to the market. Depending on whether it’s a good or bad week, your terms can materially change."
"We had our first discussion with Sigma in August and delivered in the agreed terms in November, once the M&A negotiation was completed.”
Camiña declined to comment on the pricing of the old or the new debt.
Milbank and Payet Rey Cauvi acted as New York and local counsel for the issuer, while Clifford Chance and Garrigues advised AllianzGI.