Queen Alia International Airport Project, Jordan Case Study Madhavi Gosavi, Partner Norton Rose LLP 11 September 2009
The Project 25-year concession for the rehabilitation, expansion and operation of the Queen Alia International Airport in Amman, Jordan Possibly the first Middle-East PPP-style dual tranche conventional loan and Islamic facility Jordan's biggest project finance deal & largest private sector investment Project Value: US$675m
The Transaction The Rehabilitation, Expansion and Operation of the Queen Alia International Airport
Parties Project Co: Airport International Group P.S.C. Sponsors: J&P Avax S.A Joannou & Paraskevaides (Overseas) Ltd EDGO Investment Holdings Ltd Noor Financial Investment Company KSCC Aéroports de Paris Management S.A. Abu Dhabi Investment Company
Parties (continued) EPC Contractor (Unincorporated Joint Venture) J&P Avax S.A Joannou & Paraskevaides (Overseas) Ltd O&M Contractor Jordan Airport Management S.A.
Parties (continued) Financiers: International Finance Corporation Islamic Development Bank Sub-participant Banks: Calyon Natixis Europe Arab Bank The Hashemite Kingdom of Jordan: Jordanian Ministry of Industry and Trade Civil Aviation Regulatory Commission
The Concession - REOA Concession period: 25 years refurbishment and upgrade of the existing Airport (not including runways) Building of New Terminal Operation and management of the airport (including collection of revenue and airport charges) Concession Fee Initial fee of US$1 million Annual fee of 54.47% of gross revenues for 6 years and 54.64% thereafter Competition Exclusivity on scheduled commercial flights until passenger volume is 8 million in a 12 month period No financial assistance to other airports within a 200km radius with charges of less than 50%
The Concession - REOA Currency/inflation protection 25% inflation in any one year Dinar/Dollar exchange rate Force majeure and Political events protection Extension of time Protection against termination Compensation for revenue shortfall Termination 100% debt assumed by the Government Concessionaire default compensation: equity distributions Govt default compensation: value of equity x 18% for each year
Consent and Assumption Form of direct agreement with the Government Not a traditional direct agreement with step-in and novation Provided for assumption of debt upon termination of the concession Negotiated full payout for lenders upon termination/acceleration
The Financing i Conventional Facility: IFC A Loan: US$70m IFC B Loan: US$160m (sub-participated to Calyon, Natixis and Europe Arab Bank) IFC C Loan: US$40m IFC Standby Loan: US$10m Islamic Facility: Istisna a (Islamic Manufacturing) and Ijarah Mawsufa Fi Al Zimah (Islamic Forward Lease): US$100m Total equity: US$370m
Structuring the financing: i Issues Conventional and Islamic financing to be on a pari passu basis To meet Shariah requirements IDB needed to: find an asset(s) with a life greater than 18 years have minimum ownership rights on the identified asset(s) which it can lease to Project Co Issues with GOJ what assets to choose? what kind of agreements to enter into? Issues with Project Co and GOJ transferring AIG s obligations under the REOA to IDB
The Solution Commission Lease : AIG & IDB co-lessees but of different property Hashemite Kingdom of Jordan Commission Lease Non-Excluded Assets [Site, Immoveable Property (but excluding New Terminal Site) & Commission Moveable Property] AIG 25 years Reversion of the IDB s interest upon the expiry of the 18 years Facility Term Excluded Assets [New Terminal Site] IDB
The Final Structure: Flow of funds REO Hashemite Kingdom of Jordan Commission Lease IDB Consent & Assumption Intercreditor Security Trustee Ijarah Mawsufa Fi Al Dimah Istisna Commission Lease Airport International Group P.S.C. Banks 44% of the gross income 56% of the gross income Security Account Islamic Financing Income Conventional Financing
Flow of funds Financing Diagram Purchase Undertaking Excluded Assets REOA Forward Ijarah (Excluded Assets) Commission Lease Commission Intercreditor Sale Undertaking Istisna a Non-Excluded Assets Airport International Group P.S.C. IFC Loan : 56% of the gross income 44% of the gross income Security Account IFC A Loan IFC B Loan Calyon Natixis Islamic Financing Income IFC C Loan Europe Arab Bank Conventional Financing
Financing: Unique Features Pari passu drawdown Pari passu prepayment of all senior facilities (not IFC C Loan and Standby) Prepayment fee on all prepayments Two forecast DSCRs one for IFC and the other for sub-participants Shariah terms
ACCOUNTS STRUCTURE OFFSHORE A/Cs (US$) ONSHORE A/C (JDS) Revenues (US$) Construction Costs / Etc. OFFSHORE PROCEEDS A/C Freedom to transfer (as and when needed) ONSHORE PROCEEDS A/C Balance Revenues (JD) Investment Fee ADP Fee FIN. MRA A/C MAINT. RESERVE A/C ENHANCEMENT RESERVE A/C DSRA A/C DEBT SERVICE INSURANCE PROCEEDS A/C DISTRIBUTIONS A/C COMPENSATION PROCEEDS A/C
Hedging 100% Facilities hedged but no Islamic hedging g 4 Swap counterparties IFC, Natixis, Calyon and EAB 4 scheduled swap dates 60% of IFC commitments by first utilisation 60% of IDB commitments by 15 th January 2008 20% of all commitments 6 months from financial close 20% of all commitments 12 months from financial close 24 swaps in total
Sub-contracts Construction Contract O & M Contract Interface issues due to construction on an operating airport Hotel Management Duty Free contract Government Services