Bank of China contributes £50 million GBP to a £650 million GBP five-year term loan tranche of the £2.302 billion GBP syndicated debt for Quad Gas Group's acquisition of a 61% stake in National Grid Gas Distribution (Linked to Record ID#94505, #94509, #100109, #100110, #100111, #100112, and #100113)

Project narrative

On March 31, 2017, financial close was reached on a deal in which a syndicate of 13 banks — including the Bank of China (BOC) and China Construction Bank Corporation (CCB) — entered into a £2.302 billion GBP ($2.87269 billion USD) syndicated debt agreement with Quad Gas Group — a special purpose vehicle (SPV) consortium jointly owned by Macquarie Infrastructure and Real Assets (MIRA) (23.77% equity stake), CIC Capital Corporation, a wholly-owned direct subsidiary of China Investment Corporation (CIC) (17.21% equity stake), Allianz Capital Partners (16.72% equity stake), Hermes Investment Management (13.93% equity stake), Qatari sovereign wealth fund Qatar Investment Authority (QIA) (13.93% equity stake), Amber Infrastructure-managed fund International Public Partnerships Limited (INPP) (7.21% equity stake), and Dalmore Capital Limited (7.21% equity stake) — for the acquisition of a 61% equity stake in National Grid Gas Distribution (NGGD), the gas distribution business of National Grid plc. The £2.302 billion GBP of syndicated debt was divided into five tranches: a £650.00 million GBP ($811.14 million USD) senior term loan tranche with a maturity period of three years, a final maturity date of March 31, 2020, and an interest rate of LIBOR plus an initial margin of 110 basis points, a £650.00 million GBP senior term loan tranche with a maturity period of five years and a final maturity date of March 31, 2022, a £380.00 million GBP ($474.21 million USD) revolving credit facility (RCF) tranche, a £120.00 million GBP ($149.75 million USD) debt service service facility tranche, and a £502.00 million GBP ($626.45 million USD) private placement tranche with a maturity period of 25 years and a final maturity date of March 31, 2042. All 13 lenders, including BOC and CCB, contributed to four of the five tranches; SMBC Nikko Capital Markets, two other arrangers, and Macquarie Infrastructure Debt Investment Solutions (MIDIS), were solely responsible for the provision of the £502 million GBP private placement. In addition to BOC and CCB, the following 11 lenders made up the 13 bank lenders to this loan: BNP Paribas S.A., Crédit Agricole Group, ING Group N.V., JPMorgan Chase Bank, the Bank of Tokyo-Mitsubishi UFJ., Ltd. (BTMU), Banco Santander S.A., Skandinaviska Enskilda Banken AB (SEB), Sumitomo Mitsui Banking Corporation (SMBC), Société Générale S.A. (SocGen), Royal Bank of Canada (RBC), and Royal Bank of Scotland (RBS). All 13 lenders, including BOC and CCB, contributed £50.00 million GBP ($62.40 million USD) to the three-year £650 million GBP term loan tranche. Record ID#94505 captures BOC's contribution to the tranche. Record ID#94509 captures CCB's contribution to the tranche. All 13 lenders, including BOC and CCB, contributed £50.00 million GBP to the five-year £650 million GBP term loan tranche. Record ID#100108 captures BOC's contribution to the tranche. Record ID#100109 captures CCB's contribution to the tranche. All 13 lenders, including BOC and CCB, contributed £29.23 million GBP ($29.23 million USD) to the £380 million GBP RCF tranche. Record ID#100110 captures BOC's contribution to the tranche. Record ID#100111 captures CCB's contribution to the tranche. All 13 lenders, including BOC, contributed £9.23 million GBP ($11.52 million USD) to the £120 million GBP debt service reserve facility tranche. Record ID#100112 captures BOC's contribution to the tranche. Record ID#100113 captures CCB's contribution to the tranche. In addition to the debt, the sponsors provided £3.600 billion GBP ($4.49248 billion USD) in cash equity for the acquisition: Macquarie contributed £855.72 million GBP ($1.06786 billion USD), CIC Capital contributed £619.67 million GBP ($773.29 million USD), Allianz Capital Partners contributed £601.96 million GBP ($751.19 million USD), Hermes Investment Management (£501.67 million GBP; $626.04 million USD), QIA (£501.67 million GBP), INPP (£259.69 million GBP; $324.07 million USD), and Dalmore Capital (£259.69 million GBP). In total, the project cost was £5.902 million GBP ($7.36516 billion USD). The proceeds of the debt were to be used by Quad Gas Group to finance its acquisition of a 61% equity stake in NGGD from National Grid plc, the British multinational electricity and gas utility company. NGGD is the largest distributor of gas in the United Kingdom, with almost 11 millions households and businesses as customers. It is the owner and operator of four regulated gas distribution networks, covering the East of England, North London, North West England, and West Midlands that include some of the largest cities in Britain, namely London, Birmingham, and Manchester. NGGD owned 82,000 miles (130,000 kilometers) of gas pipeline and had almost 5,700 full-time workers and an estimated regulated asset value of £8.7 billion GBP as of September 30, 2016, representing 14% of the total regulated energy infrastructure in Britain by regulated asset value. On December 8, 2016, it was announced that Quad Gas Group had entered into an agreement with National Grid in which National Grid plc agreed to sell a 61% stake in NGGD to Quad Gas. National Grid would retain a 31% stake in NGGD; via their holdings in Quad Gas Group, the project sponsors would acquire the following stakes in NGGD upon acquisition: MIRA (14.5% equity stake), CIC Capital Corporation (10.5% equity stake), Allianz Capital Partners (10.2% equity stake), Hermes Investment Management (8.5% equity stake), QIA (8.5% equity stake), INPP (4.4% equity stake), and Dalmore Capital (4.4% equity stake). Quad Gas Group also entered into an agreement with National Grid that included an option, at the discretion of National Grid or Quad Gas, for Quad to acquire a further 14% equity interest in NGGD between March 1, 2019 and October 31, 2019 for £0.8 billion GBP. The acquisition was expected to complete in the first quarter of 2017 after regulatory approval. The sale was completed on March 31, 2017. After the acquisition, NGGD was renamed to Cadent Gas Limited. The acquisition was announced at a time of intense interest in foreign ownership of British infrastructure assets. In September 2016, the Government of the United Kingdom announced a review to the rules for foreign investment in domestic infrastructure after much controversy over China General Nuclear Power Group (CGN)'s involvement in the Hinkley Point C (HPC) Nuclear Power Plant Project (see Record ID #s #90455, #89650, #90461, #90465, and #90466), which Prime Minister Theresa May had ordered a review for, which was approved in May 2016. Thus, CIC's role in acquiring 10.5% of NGGD (via Quad Gas Group) was scrutinized. For its part, at the time of the acquisition, CIC already possessed shareholdings in Heathrow Airport and Thames Water, which the chief executive officer of National Grid John Pettigrew, pointed to when arguing that its involvement had no associated issues.