ICBC provides $1.2 billion loan to KMO Anadolu Otoyol Isletmesi for the construction of the Odayeri-Paşaköy Section of the Northern Marmara Motorway (including Third Bosphorus Bridge) Project

On May 29, 2012, Turkey's Ministry of Transport granted a 10-year concession agreement to ICA IC İçtaş Astaldi Üçüncü Boğaz Köprüsü ve Kuzey Marmara Otoyolu Yatırım ve İşletme A.Ş. (IC Ictas-Astaldi or ICA) — a joint venture between an Italian construction company called Astaldi S.P.A (33.33% ownership stake) and a Turkish construction company called IC İçtaş Construction Industry ve Ticaret A.S. (66.66% ownership stake) — for the Northern Marmara Motorway and Third Bosphorus Bridge Project (also known as the Third Bosphorus Bridge PPP Project and the Yavuz Sultan Selim Bridge PPP Project). 30 months of the 10-year concession is for bridge construction activities and the remaining period is for bridge management activities. The public-private partnership (PPP) project was implemented on a BOT (Build, Operate, Transfer) basis and financed according to a debt-to-equity ratio of 80:20. The original, non-recourse $2.67 billion debt financing package consisted of two syndicated loan agreements with two different special purpose vehicles (project companies): a $1.04 billion loan with Avrupa Otoyolu Yatirim ve Iletme A.S. for the 171 km Kurtköy-Akyazı Section (“Asia Section” or “NMM Asia”) of the Northern Marmara Motorway and Third Bosphorus Bridge Project and a $1.63 billion loan with KMO Anadolu Otoyol Isletmesi A.S. for the 90 km Kınalı-Odayeri Section (“Europe Section” or “NMM Europe”) of the Northern Marmara Motorway and Third Bosphorus Bridge Project. The loan agreements were signed in September 2013 and financial close was achieved May 2014. The loan were issued by six local banks, including Turkish banks (Türkiye Garanti Bankasi A.S., Türkiye Is Bankasi A.S., QNB Finansbank A.S., T.C. Ziraat Bankasi A.S., Türkiye Halk Bankasi A.S. and Türkiye Vakiflar Bankasi T.A.O.). One loan will mature in December 2022 (with a fixed interest rate of 7.6%) and the other will mature in June 2024 (with a floating interest rate of LIBOR + 550 basis points). Additionally, $600 million of equity financing was provided by Astaldi S.P.A and IC İçtaş Construction Industry ve Ticaret A.S.: $387.33 million IC İçtaş Construction Industry ve Ticaret A.S. and $193.67 million from Astaldi S.P.A. The Government of Turkey issued a sovereign guarantee, agreeing to repay the debt incurred by borrower/project company (IC Ictas-Astaldi) in the event that it defaulted on its repayment obligations. The Government of Turkey’s General Directorate of Highways (KGM) also provided a minimum traffic guarantee to the project company (to secure the payback of the debt and equity if the generated revenue was insufficient). Then, in 2018, the Industrial and Commercial Bank of China's branch in Turkey (ICBC Turkey) was mandated by IC Ictas-Astaldi to lead and arrange syndication for the refinancing of $2.67 billion of debt used to construct the Third Bosphorus Bridge (or Yavuz Sultan Selim Bridge) and North Marmara Motorway PPP Project. A letter of authorization for the refinancing was signed at the One Belt, One Road Investment and Financial Cooperation Summit in Ankara on July 26, 2018. Under the agreement, ICBC Turkey agreed in principle to facilitate the refinancing of the project, previously funded by the Turkish banking system, on more favorable terms. Then, in September 2019, two syndicated loan agreements worth $4.435 billion were signed (with ICBC serving as the lead arranger) for the Kurtköy-Akyazı and Kınalı-Odayeri sections of the project: a $2,840,000,000 loan agreement was signed by KMO Anadolu Otoyol Isletmesi A.S. and a group of ten lenders (ICBC Turkey, Bank of China, Kuveyt Türk Katilim Bankasi A.S., Albaraka Türk Katılım Bankası A.Ş., Türkiye Garanti Bankasi A.S., Türkiye Is Bankasi A.S., QNB Finansbank A.S., T.C. Ziraat Bankasi A.S., Türkiye Halk Bankasi A.S. and Türkiye Vakiflar Bankasi T.A.O.) to refinance the $1.04 billion loan that was issued in September 2013 for the 171 km Kurtköy-Akyazı Section of the Northern Marmara Motorway and Third Bosphorus Bridge Project and finance new/additional capex requirements as a result of changes in the project scope (that increased the total cost of the project’s 171 km Kurtköy-Akyazı Section to $3.646 billion); and a $1,595,000,000 loan was signed by KMO Anadolu Otoyol Isletmesi A.S. and a group of ten lenders (ICBC Turkey, Bank of China, Kuveyt Türk Katilim Bankasi A.S., Albaraka Türk Katılım Bankası A.Ş., Türkiye Garanti Bankasi A.S., Türkiye Is Bankasi A.S., QNB Finansbank A.S., T.C. Ziraat Bankasi A.S., Türkiye Halk Bankasi A.S. and Türkiye Vakiflar Bankasi T.A.O.) to refinance the $1.63 billion loan that was issued in September 2013 for the 90 km Kınalı-Odayeri Section of the Northern Marmara Motorway and Third Bosphorus Bridge Project and finance new/additional capex requirements as a result of changes in the project scope (that increased the total cost of the project’s 90 km Kınalı-Odayeri Section to $2.077 billion). The two loans have two different maturity lengths, reflecting the different concession lengths of the two sponsors. The Government of Turkey issued a sovereign guarantee for both loans on September 16, 2019. The total amount that was reportedly provided (across both loans) by ICBC Turkey was $1 billion (as captured via Project ID#67325). Bank of China’s estimated contribution to both loans ($381,666,666) is captured via Project ID#67331. Then, on December 2, 2021, ICBC and KMO Anadolu Otoyol Isletmesi A.S. signed a $1,198,302,550 loan agreement (captured via Project ID#96108) to refinance a $2,138,000,000 loan that was issued on May 13, 2014 signed in 2014 and a $420,000,000 loan that was issued on March 11, 2016 for the Odayeri-Paşaköy Section of the Northern Marmara Motorway (including Third Bosphorus Bridge) Project. The borrowing terms of the ICBC loan are unknown. The Government of Turkey issued a sovereign guarantee for the $1,198,302,550 loan on December 2, 2021. The purpose of the project was to construct a 1.408 kilometer long-span bridge to be used by road vehicles and trains to cross the Bosphorus Strait from Poyrazkoy in Asia to Garipce in Europe, as well as the construction of a section of the North Marmara Highway along the Odayeri-Pasakoy route. The bridge is 59 meters long and it stretches 1,408 meters over the Bosporus, linking the European and Asian sides of Istanbul. It has eight highway lanes (4 in each direction), divided by two high-speed rail corridors of 1,048 meters. The bridge is a critical part of the larger Northern Marmara Highway (Motorway) Project, linking to the Odayeri-Pasaköy route of the Motorway. The 261 km km Northern Marmara Highway was intended to increase economic efficiency in Turkey, allow for greater access to Istanbul Airport, provide alternate routes to going through Istanbul, and start on the western side of Istanbul and end in the eastern Marmara province of Sakarya. ICA IC İçtaş Astaldi Üçüncü Boğaz Köprüsü ve Kuzey Marmara Otoyolu Yatırım ve İşletme A.Ş. (IC Ictas-Astaldi) was responsible for project implementation. Construction began in September 2012 using the SPV's equity, and was originally expected to take 36 months. The Odayeri-Paşaköy section of the motorway was completed August 26, 2016. The Kurtköy-Akyazı section of the project was completed and opened to traffic on December 19, 2020. On December 23, 2019, China Merchants Expressway Network & Technology Holdings Co. Ltd, China Merchants Union (BVI) Limited, Jiangsu Expressway Company Limited, Zhejiang Expressway Co. Ltd., Anhui Expressway Company Limited and Sichuan Expressway Co announced that it had entered an agreement and jointly set up a consortium company (“Consortium Company”) to acquire: (1) 51% equity stake in IC Ictas-Astaldi (the SPV responsible for the Third Bosphorus Bridge PPP Project); (2) 51% of a related shareholder loan of IC Ictas-Astaldi; and (3) 51% equity stake in Eurasia Motorway Maintenance and Operations Limited (“IC Maintenance”), a company engages in the operations and maintenance of projects operated by IC Ictas-Astaldi. Shareholders of the Consortium Company expected to invest up to $688.5 million. As a part of the acquisition, China Merchants, China Merchants United, Zhejiang Expressway, Jiangsu Expressway, Sichuan Expressway and Anhui Expressway held 31%, 20%, 17.5%, 17.5%, 7% and 7% equity stakes in the Consortium Company, respectively. Upon completion of the acquisition, the Zhejiang Expressway Co., Ltd. would indirectly hold an 8.925% equity stake in IC Ictas-Astaldi, 8.925% of the related shareholder loan of IC Ictas-Astaldi, and an 8.925% equity stake in IC Maintenance, respectively. However, the preliminary agreement that was signed on December 23, 2019 was interrupted due to the Covid-19 pandemic. ICBC, Bank of China, and China Merchants Bank subsequently indicated that they were willing to issue a $1.6 billion loan to the Consortium Company in 2021 to facilitate their acquisition of a 51% ownership stake in IC Ictas-Astaldi for $688.5 million. Their loan would mature in 2027, just before the project company’s concession expired. Sinosure would provide credit insurance. However, IJ Global reported in August 2021 that the Chinese companies in the Consortium Company requested to enter into negotiations to terminate the acquisition agreement. Then, in March 2020, Astaldi sold its stake in IC Ictas-Astaldi (the SPV) to IC İçtaş Construction Industry ve Ticaret A.S., with the latter becoming the sole owner.

Additional details

1. Some sources suggest that the $1,198,302,550 loan is a syndicated loan and Bank of China is a participant in the syndicate. This issue warrants further investigation. 2. Some sources suggest that the December 2, 2021 loan agreement was worth $2.4 billion rather than $1,198,302,550. This issue warrants further investigation. 3. The intent variable is coded as ‘mixed’ since the PPP project involves equity contributions, which imply some degree of commercial intent. 4. IC İÇTAŞ İnşaat Sanayi ve Ticaret A.Ş. is the flagship company within IC İbrahim Çeçen Yatırım Holding A.Ş. It is one of the leading construction and concession investment companies in Turkey, which focuses on PPP projects in partnership with international counterparties and leading financial institutions, and has completed projects including highways, bridges, airports, seaports, marinas, high-speed train projects, high-capacity power plants, smart buildings, trade centers, tourist facilities, irrigation systems, public buildings, mass housing projects, health facilities, and universities and schools in Turkey, Russia, Middle East, Eastern Europe, and the USA. 5. The borrowing institutions — Avrupa Otoyolu Yatirim ve Iletme A.S. and KMO Anadolu Otoyol Isletmesi A.S. — are both owned by a consortium of leading Turkish construction companies consisting of Cengiz Insaat Sanayi ve Ticaret A.S., Limak Insaat Sanayi ve Ticaret A.S., Kolin Insaat Turizm Sanayi ve Ticaret A.S., Kalyon Insaat Sanayi ve Ticaret A.S., RSY Insaat Sanayi ve Ticaret A.S. and Pak Yatirim Insaat Sanayi ve Ticaret A.S.

Number of official sources

5

Number of total sources

8