11:15 12:30 - Panel 3 - Tansa. Project Finance: from Banking Solutions to Capital Market Solutions

Transcription

1 11:15 12:30 - Panel 3 - Tansa 1 : from Banking Solutions to Capital Market Solutions

2 2 : From Banking Solutions To Capital Market Solutions Presented By Calyon Corporate and Investment Banking

3 Introduction 3 Evolution of financing options available to finance single assets Capital Market Solutions Case Study Perspectives

4 Transactions 4 Predominantly a commercial bank market Applicable to high maintenance transactions Heavily covenanted Typically requires close monitoring, especially during construction phase Requires asset expertise to grasp the stakes Typically assets with long lives best suited for long term financings

5 Evolution towards Capital Markets 5 Drivers: Sponsor standpoint: Bank mini-perm take out refinancings Decrease in credit spreads for long tenors Investors standpoint: Overall decrease in corporate yields make this class of assets attractive Savvy investors have the capability to analyze and assess project finance transactions Two types of capital market avenues: Project Bonds Term B Loan

6 Capital Markets Solutions 6

7 Capital Markets: Term Loan B 7 Sub-Investment Grade Issues: Includes so-called Term Loan B market, high-yield market, both also called the leveraged loan market overlapping investors with a variety of preferred investment currencies. Term B : variable rate fully-funded term loans, usually large liquid issues, short maturities (7 to 10 years), cash sweeps instead of scheduled amortization; limited financial ratio maintenance covenants. High Yield : includes smaller issues requiring less liquidity, longer term, fixed coupon, little or no amortization; limited financial occurrence covenants. Sub-Investment grade transactions in PF world tend to involve acquisitions rather than new builds. Issuers tend to be privately-owned, with less credit-rating sensitivity, often smaller developers teamed up with private equity. Increasing leverage is the primary objective of these issues; speed of execution and flexibility are other objectives pricing is less important.

8 Capital Markets : Project Bonds 8 The Project Bond Market : refers to private placement type of issues (Typically Reg. D or 144A)backed by single assets financed in a project finance way. Specific features of Project Bonds include: Fixed coupons Long tenors and deferred amortization Make whole premium in case of prepayment Typically limited number of disbursements over a relatively short period of time. Project Bonds are principally issued in refinancings for new builds or bridge loan takeouts for acquisitions. Issuer-sponsors tend to be strong strategics or public companies protecting high credit ratings and share prices.

9 Capital Markets : Project Bonds 9 Global PF Market by funding sources : Amounts in $ billions Volume Tot Vol Bonds Years

10 Capital Markets : Project Bonds 10 The Project Bond market volume declined mildly in 2005: its share e of the overall market dropped from 32% in 03 to 16% in 05 World-wide Non-Recourse Project Bonds issuance $35bn $30bn $25bn $20bn $15bn $10bn $5bn $0bn % 30% 25% 20% 15% 10% 5% 0% Global Bond Debt As % of PF Financing (RH) Source: International

11 Capital Markets : Project Bonds Robust 54% growth in North America did not offset drastic declines in South America and Australia and zero issuance in Europe World-wide Project Bonds issuance, by geography 11 $35bn $30bn $25bn $20bn $15bn $10bn $5bn Europe As ia MiddleEast&Africa Australia&NA SouthAmerica UK NorthAmerica $0bn Source: International

12 Capital Markets : Project Bonds 12 Oil & Gas and Power dominates global issuance, jointly accounting for 63% of global volume World-wide Project Bonds issuance, by sector Infrastructure 14% Mining 3% Petrochemicals 1% Oil and Gas 36% Social Infrastructure/P FI 19% Power 27% Source: International

13 Are Capital Markets Products Replacing Bank Loans in? 13 US Experience: Capital demand is concentrated in acquisitions rather than new builds right now Project Bonds (senior tranche investment grade) continue to take their share of the market, principally as a refinancing solution for project initially bank-financed. Project bonds typically monetize an improving or stabilizing credit story. (e.g. completed power plant; up-rated infrastructure). Leveraged loans (B loans, high yield) are marginalizing the bank solution in acquisitions and certain refinancing (especially merchant power). banks have credit tolerances that are too narrow B loans provide faster execution and less structure than banks. Project bank loans still prevail in construction situations, bridges to bond take-outs and smaller projects. Bond can be combined with Bank Tranches and with Bank providing supporting Letters of Credit and Working Capital facilities.

14 Comparative Table 14 Success in the US, less so in Europe: the Distribution Angle Americas Europe Bank Bond B Loan Bank Bond Tenor Up to 20 years Up to 30 years 7 to 10 years Up to 30 years Generally 10 years Repayment Amortizing Amortizing Cash Sweep Amortizing Bullet Interest Rate Floating Fixed Floating Floating Floating Target Rating NA IG and high non IG Non IG NA High IG Prepayment Penalty NA Make Whole 0-2 years NA NA

15 Case Study: Tenaska Alabama II 15

16 Case Study: Tenaska Alabama II 16 October 2003 Tenaska Alabama II Partners LP $410,500,000 Senior Secured Notes due a/Reg S Private Placement Joint Lead Managing Bookrunner Transaction Description: $410,500,000 project bond financing secured by a peaking plant in central Alabama. Challenging Aspect: Maximizing the financing proceeds - up to 95% of the project costs. Low equity resulted in lower than typical debt service coverage ratios. Solution: Monetization of long-term off-take contract with Coral Power whose obligations were guaranteed by Coral Energy Holdings whose obligations are in turn guaranteed by Shell Oil Company. Obtained Baa3/BBB- ratings but marketed deal as derivative Shell risk which resulted in more attractive credit spread. 1 st refinancing of a mini-perm in the capital markets. Calyon Role: Lead Managing Bookrunner. The transaction was recognized as 2003 Americas Bond Deal of the Year by International and Single Asset Deal of the Year by Euromoney. Obtained over $1.2 billion in orders.

17 Case Study: Tenaska Alabama II 17 October 2003 Transaction Description: $26,600,000 Letter of Credit facilities to cover DSR and Project LC needs. $5,000,000 Working Capital facility Tenaska Alabama II Partners LP $410,500,000 $31,600,000 Senior Secured Notes due a/Reg Project S Private Finance Placement Joint Lead Administrative Managing Agent Bookrunner Challenging Aspect: Integration with 144A bond offering. Solution: Cash waterfall Pari-passu treatment of all financings. Calyon Role: Lead Arranger.

18 Perspectives 18

19 Will the U.S. Experience be replicated globally? 19 Distinguishing Features of US and Global Markets Large investor universe in the US with diversified appetite across asset classes and credit rating Implication Good outlook for Banks, Term Loan B and US denominated issues placed in the US market Expanding investor universe in Europe but European project finance banks are much more aggressive lenders in their home markets Project Bonds are less competitive with the long term low margin project loans prevailing outside of the U.S. Market. Beginning of Term loan B The universe of project issuers outside of the US market is smaller and has traditionally been dominated by large highly rated strategics Project bonds applicable to: - Diversify source of funding - Provide access to another source of liquidity.

20 Credentials 20

21 Calyon Credentials Project Bonds Firm Underwritings 21 Windsor Financing LLC Bethpage Energy Center Pinelawn Power LLC Tenaska Alabama Partners LP $285,500,000 Senior Bonds due 2017 $52,000,000 Subordinated Notes due 2016 $108,516,000 Series A Certificates due 2025 $14,631,000 Series B Certificates due 2020 $102,213,000 Senior Secured Notes due 2025 $361,000,000 Senior Secured Notes due a/Reg S Private Placement Joint Lead Manager 144a/Reg S Private Placement Sole Arranger / Underwriter 144a/Reg S Private Placement Sole Arranger / Underwriter 144a/Reg S Private Placement Co Arranger Rockland Capital Energy Investments Prime Power Sales I LLC Tenaska Virginia Partners Kiowa Power Partners Tenaska Alabama II Partners FPL Energy Far Rockaway Peaking, LLC $50,000,000 Senior Secured Notes due 2009 $483,500,000 Senior Secured Notes due 2024 $642,000,000 Senior Secured Notes due 2013/21 $410,500,000 Senior Secured Notes due 2023 $117,000,000 Senior Secured Notes due a/Reg S Private Placement Sole Arranger 144a/Reg S Private Placement Joint Lead Manager 144a/Reg S Private Placement Joint Lead Manager 144a/Reg S Private Placement Joint Lead Manager Reg D Private Placement Sole Arranger

22 A Global Securitisation Network of Expertise 22 America Europe Asia US CP Conduits : Capital calls Residential Mortgage Warehousing Auto loans Trade receivables ABS : Commercial Real Estate Transportation (aircraft, train ) Public Finance Energy and Infrastructure Alternative Risk Transfer Residential Mortgage, leasing, credit card, auto loan, Commercial Real Estate Public Finance Trade receivable Transportation (aircraft, car and truck fleet ) Whole business securitisation/leverage Finance Alternative Risk Transfer Residential mortgage Auto Loan Commercial Mortgage Alternative Risk Transfer

23 Fixed Income Institutional Sales 23 Calyon has key relationships with leading institutional investors. Issuers can leverage our deep knowledge of institutional investors and close working relationships with the leading players in the industry. We have an established relationship with each of the top 25 institutional holders of corporate securities. Below is a sampling of Tier I (invest from $25 - $100 million per transaction) and Tier II (invest from $5 - $50 million per transaction) investors that have played key roles in virtually all of our recent lead-managed transactions: Tier I Investors Tier II Investors Rank Top 25 Instituional Holders 1 Prudential Global Asset Management 2 AIG Global Investment Management 3 Metropolitan Life Insurance Company 4 AEGON USA 5 Teachers Insurance & Annuity Association 6 New York Life Investment Management 7 GE Financial Assurance Holdings, Inc. 8 Pacific Investment Management Co. 9 Fidelity Management & Research Company 10 Northwestern Investment Management Company 11 ING Investment Management Inc. 12 John Hancock Life Incurance Company 13 Alliance Capital Management L.P. 14 Hartford Investment Management Company 15 Allstate Investments, LLC 16 Principal Capital Income Investors, LLC 17 State Farm Insurance Companies 18 PPM America Inc. 19 The Vanguard Group, Inc. 20 CIGNA Retirement and Investment Management Inc. 21 Nationwide Insurance Companies 22 Delaware Lincoln Investment Advisers 23 American Family Life Assurance Company (AFLAC) 24 David L. Babson & Company, Inc. 25 American Express Financial Advisors

24 Calyon Credit Trading 24 Market-Making Investment Grade limits Banks and finance companies Industrials and utilities Close Cooperation with Origination Strong involvement with new issues pricing Management of residual primary positions Account Focus Take advantage of the existing sales network within CAI/CLA to expand flow activities in Europe, Asia Expand automated trading capability in Europe and US through Bloomberg and Market Access CDS Trading Market making in single name CDS Segmented customer list Servicing of structured portfolio Basis trade proposal to customers Bank s hedging needs Integration with Calyon global strategy Coordination with European Desk (24 hour global trading support for positions) Strong involvement in new issue pricing

25 25 Project finance is one of the core products of the bank globally: Calyon has approximately 125 people specializing in project finance around the globe including Paris, London, New York and Singapore. Calyon is a leader in the financing of capital intensive infrastructure, natural resources and industrial projects. Calyon is dedicated to providing project finance services which meet our clients financing and ownership objectives. We have demonstrated our leadership in arranging innovative project financing solutions in response to our clients needs through multiple products. The bank has significant underwriting capacities and private placement capabilities, including PFI s Bond Deal of the Year for 2003 and PFI s Latin America Deal of the Year 2005.

26 Calyon Credentials - 26 AES New York Atlantic LNG Trinity Coal LLC NorthEast Biofuels LLC Odessa-Ector Power Partners O.P. $350,000,000 $238,613,350 $90,000,000 $217,000,000 $234,000,000 Lead Arranger August 2006 Sole Lead Arranger & Administrative Agent June 2006 Mandated Lead arranger Sole Bookrunner June 2006 Co-documentation Agent Construction Agent June 2006 Syndication Agent February 2006 Charter Development LLC $500,000,000 Mandated Lead Arranger Thermal North America, Inc. $312,000,000 Project finance Syndication Agent Cerro Verde $450,000,000 Global Coordinator Bookrunner of the Bank Tranche Energia Concon $410,000,000 Joint Bookrunner & Syndication Agent Astoria Energy $103,000,000 Sole Bookrunner & Administrative Agent November 2005 October 2005 September 2005 June 2005 April 2005 Steamboat Holdings Pemex Top Deer Ventures Sabine Pass LNG L.P. Chicago Skyway $503,000,000 $4,250,000,000 $71,576,000 $822,000,000 $1,190,000,000 Lead Arranger & Administrative Agent Arranger Lead arranger Arranger Joint Lead Arranger & Syndication Agent March 2005 March 2005 March 2005 February 2005 January 2005

27 Contacts 27

28 Calyon Contact List Debt Capital Markets Michel Anastassiades Global Head of Managing Director michel.anastassiades@calyon.com Ron Krolick Debt Capital Markets Managing Director ron.krolick@us.calyon.com Jim Guidera Head of Americas Managing Director james.guidera@us.calyon.com Olivier Delay Specialized Asset Securitization Director olivier.delay@us.calyon.com

29 New York, Monday, October 23,