China Construction Bank contributes $140 million AUD to the $2.362 billion AUD syndicated loan for the Melbourne EastLink Public-Private Partnership (PPP) Project

Project narrative

On February 28, 2005, a syndicate of 18 banks — including China Construction Bank Corporation (CCB) — entered into a $2,369,500,000 AUD ($1.856 billion USD) syndicated senior debt facilities agreement with ConnectEast Finance Pty Limited — an Australia-incorporated special purpose vehicle (SPV) and wholly-owned subsidiary of ConnectEast Holding 2 Pty Ltd, an Australia-incorporated wholly-owned subsidiary of ConnectEast Holding Trust (CEHT) (which, together with ConnectEast Investment Trust (CEIT), made up the ConnectEast Group, that was an Australia-incorporated, Australian Securities Exchange-listed group headquartered in Mount Waverley, Victoria — for the Melbourne EastLink Public-Private Partnership (PPP) Project. ConnectEast Finance on-lent the proceeds to ConnectEast Asset Trust. The debt facilities consisted of three tranches: a $290 million AUD ($225 million USD) equity bridge tranche, a $2.072 billion AUD ($1.624 billion USD) construction facility tranche, and a $7.5 million AUD ($5.83 million USD) bank bond facility. The $2.072 billion AUD construction facility tranche that would begin with a 49-month (4.083 years) construction period before converting into a $655 million USD loan with a maturity period of six years due on November 18, 2010 and an interest rate of BBSW plus a margin of 165 basis points (bps), a $655 million USD loan with a maturity period of eight years due on November 18, 2012 and an interest rate of BBSW plus a margin of 175 bps, and a $324 million USD loan with a maturity period of 10 years due on November 18, 2014 and an interest rate of BBSW plus a margin of 190 bps. The facilities were secured by (i.e. collateralized against) fixed and floating charges over all the assets and undertakings of ConnectEast Finance Pty Ltd, ConnectEast Pty Ltd, and ConnectEast Asset Trust, including a featherweight floating charge (enforceable only during the appointment of an administrator) over the various trading accounts; real property mortgages over the Eastlink project leases; and a limited recourse third party mortgage granted by ConnectEast Investment Trust 2 and ConnectEast Holding 2 Pty Ltd over their respective shares in each of ConnectEast Asset Trust, ConnectEast Pty Ltd, and ConnectEast Finance Pty Ltd. There was a security trustee. CCB contributed $140 million AUD to the loan syndicate. In addition to CCB, the following lenders contributed to the loan syndicate: Australia and New Zealand Banking Group (ANZ) ($200 million AUD), BOS International (Australia) Ltd. ($150 million AUD), National Australia Bank Limited (NAB) ($150 million AUD), Commonwealth Bank of Australia (CBA) ($150 million AUD), BNP Paribas S.A. ($140 million AUD), Royal Bank of Scotland (RBS) ($140 million AUD), WestLB AG ($140 million AUD), the Australia Branch of Société Générale S.A. (SocGen) ($130 million AUD), Calyon ($125 million AUD), the Sydney Branch of United Overseas Bank Limited (UOB) ($122 million AUD), KBC Bank N.V. ($100 million AUD), Dexia ($80 million AUD), HypoVereinsbank (HVB) ($80 million AUD), Allied Irish Banks, p.l.c. (AIB) $75 million AUD), DZ Bank AG ($50 million AUD), HSBC ($50 million AUD), and Natexis Banques Populaires ($50 million AUD). Sub-underwriting closed in January 2009. BOS (International) Australia, CBA, the Australia Branch of SocGen, and the Sydney Branch of UOB served as mandated joint lead arrangers. CCB, ANZ, BNP Paribas, Calyon, Dexia, HVB, KBC, NAB, RBS, and WestLB joined during the sub-underwriting phase as lead arrangers. AIB, DZ Bank, HSBC, and Natexis Banques Populaires joined in general syndication. The proceeds were to be used by the borrower for construction, development, operating, and financing costs and reserve accounts associated with the Melbourne EastLink Public-Private Partnership (PPP) Project, which sought to construct the EastLink, a 39-kilometer long multi-lane toll road on the M3 highway connecting Mitcham, specifically from the Eastern Freeway in the eastern suburbs of Melbourne, to the Frankston Freeway in the southeast of Melbourne, Victoria, featuring twin three-lane 1.5 kilometer-long tunnels passing under the Mullum Mullum Creek in Donvale, 17 interchanges, 86 bridges, and electronic free-flow tolling technology under a 35-year PPP concession awarded to ConnectEast Group by the Government of Victoria in October 2004. EastLink offered freeway-to-freeway connections between the Eastern Freeway, Monash Freeway, and Frankston Freeway. ConnectEast also agreed to build two non-tolled public roads, the Ringwood Bypass and the Dandenong Southern Bypass that would handed over to the state government and not operated by it. The project had an overall cost of $2.913 billion USD and featured $1.075 billion USD of equity with an initial public offer (IPO) raising $849.68 million USD and $225.64 million USD in deferred equity tranches subscribed to by Thiess, John Holland and Macquarie. This was the largest urban road and biggest greenfield project undertaken in Australia to date at close. The construction facility tranche was the largest facility to enter syndication in the Australian market this year. Road design and construction of Mitcham-Frankston was undertaken by 50:50 unincorporated joint venture between Thiess and John Holland. Sociedad Iberica de Construcciones Electricas, S.A. supplied the tolling equipment and back office computer system for EastLink. United Group was responsible for the mechanical and electrical equipment. The road was expected to be operating on or before November 30, 2008, based on a projected 49-month construction program. The road opened on June 29, 2008, with the first four weeks after opening toll free. In September 2009, Leighton Holdings, a then-major shareholder of ConnectEast and then the parent of the Thiess-John Holland joint venture, began legal action in the Victorian Supreme Court claiming $400 million AUD ($341 million USD), accusing ConnectEast of overstating traffic forecasts, leading the joint venture to speed up construction at a higher cost, allegations ConnectEast denied.