China Construction Bank contributes to $1.886 billion AUD of syndicated debt for the Brisbane North-South Bypass Tunnel (NSBT) PPP Project

Project narrative

On August 4, 2006, financial close was reached on a deal in which a syndicate of five banks — ABN Amro Bank, Calyon, HSBC Bank, National Australia Bank Limited (NAB), and WestLB AG — entered into loan agreements for a $1.336 billion AUD construction facility, a $503 million AUD council works facility, and a $155 million AUD equity bridge loan with RiverCity Motorway Finance Pty Limited — a special purpose vehicle (SPV) wholly owned by the RiverCity Motorway Group — for the Brisbane North-South Bypass Tunnel (NSBT) Public-Private-Partnership (PPP) Project. RiverCity Motorway Finance proceeded to on-lend the proceeds to RiverCity Motorway Asset Trust — another SPV wholly owned by the RiverCity Motorway Group. Then, in September 2006, the mandated lead arrangers began retail syndication of the $1.336 billion AUD construction facility and the $503 million AUD council works facility. Then, in October 2006, general syndication was closed; during syndication an additional 19 lenders — including China Construction Bank Corporation (CCB) and the Industrial and Commercial Bank of China (ICBC) — joined the syndicate to provide $1.866 billion AUD of senior bank debt, consisting of the $1.336 billion AUD construction facility and the $503 million AUD council works facility. The $1.336 billion AUD construction facility carried a maturity period of 50 months (4.166 years) and an interest rate of BBSW plus a margin of 150 basis points and was to be converted into two medium-term, interest-only tranches repayable as follows: 50% of principal outstanding due on August 4, 2014 and 50% of principal outstanding repayable on August 4, 2016. The $503 million AUD council works facility carried an interest rate of BBSW plus a margin of 150 basis points and was to be repaid with a lump sum from Brisbane City Council upon the road's commissioning. There $2.7 billion AUD in commitments made in during syndication, but the facilities remained at $1.86 billion AUD. CCB and ICBC joined in syndication as arrangers. Record ID#97235 captures CCB's contribution. Record ID#97236 captures ICBC's contribution. In addition to CCB and ICBC, the following lenders contributed to the loan syndicate: ABN Amro, Calyon, HSBC, NAB, WestLB, Australia and New Zealand Banking Group (ANZ), Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), Commonwealth Bank of Australia (CBA), DEPFA Bank, KBC Group, UniCredit Bank AG, United Overseas Bank Limited (UOB), Westpac Banking Corporation, DZ Bank AG, Allied Irish Banks, p.l.c (AIB), Bayerische Landesbank (BayernLB), Fortis, HSH Nordbank AG, Oversea-Chinese Banking Corporation, Limited (OCBC Bank), Mega Financial Holdings Co., Ltd., ERSTE Bank, and Norddeutsche Landesbank Girozentrale (NORD/LB). ABN Amro, Calyon, HSBC, NAB, and WestLB served as the original arrangers. CCB, ICBC, ANZ, BBVA, DEPFA Bank, KBC, UniCredit, UOB, Westpac joined in syndication as arrangers. DZ joined as a co-arranger in syndication. AIB, BayernLB, Fortis, HSH Nordbank, OCBC Bank, Mega Holdings, ERSTE Bank, and NORD/LB joined as managers in syndications. This loan was secured by (i.e. collateralized against) mortgages and charges over assets and undertakings (all the assets held by the RiverCity Motorway Group) by RiverCity Motorway Asset Nominee Pty Limited (as trustee of the RiverCity Motorway Asset Trust), RiverCity Motorway Pty Limited, RiverCity Motorway Finance Pty Limited, RiverCity Motorway Services Pty Limited, RiverCity Motorway Construction Pty Limited, RiverCity Motorway Asset Nominee 2 Pty Limited (as trustee of the Rivercity Motorway Asset Trust 2) and RiverCity Motorway Holdings Pty Limited. As of March 15, 2010, the entire $1,336,000,000 AUD construction facility had been drawn down. As a result, it was converted into a term facility with two tranches: $668,000,000 AUD for interest-only Tranche A due on August 4, 2014 and $668,000,000 for interest-only Tranche B due on August 4, 2016. This was effectively a maturity period extension of 4.333 years for Tranche A (a new maturity period of 8.499 years for that portion of the old debt) and 6.333 years for Tranche B (a maturity period of 10.499 years for that portion of the old debt) over the original 50-month maturity. Projects ID#97258 and #110876 capture the extension for Tranche A. Projects ID#97259 and #110877 capture the extension for Tranche B. The proceeds of this debt were used to finance $2.705 billion AUD ($2.125 billion USD) North-South Bypass Tunnel (NSBT), the first privately-financed toll road in Brisbane, Queensland. Specifically, the project sought to construct a 6.8-kilometer long section of road between Woolloongabba and Bowen Hills, including twin 4.8-kilometer two-lane tunnels underneath the Brisbane River. The NSBT also included traffic management and tunnel safety systems connected to a Tunnel Control Centre, with an automatic traffic incident detection system, closed caption television (CCTV) systems, fire monitoring systems, air monitoring systems, emergency telephones, and road barriers. The NSBT completely bypassed Brisbane's Central Business District (CBD) and linked five motorways and arterials on either side of the river, specifically the Ipswich Road and the Pacific Motorway (M3) in Woolloongabba to the Lutwyche Road and the Inner City Bypass (ICB) in Bowen Hill, and a connection to Shafston Avenue in Kangaroo Point to access Brisbane's eastern suburbs. Designed for north and southbound traffic, the NSBT was intended to reduce traffic in the center of Brisbane as part of the city's TransApex plan, saving 15 minutes of travel time and was envisioned as the first section of the new M7 Motorway. The NSBT was conducted on a public-private-partnership (PPP) basis under a 45-year concession awarded by the Brisbane City Council, with the concession including a revenue-sharing arrangement and upfront $503 million AUD contribution from Brisbane. On April 27, 2006, the RiverCity Motorway Limited consortium — comprising Leighton Contractors, Bilfinger Berger BOT (through its Australian subsidiary Baulderstone Hornibrook), Bilfinger Berger Concessions, and ABN AMRO Bank (according to this equity breakdown: Bilfinger Berger (50% equity stake), Hochtief (25% equity stake), and ABN AMRO Bank (25% equity stake)) — won the bid to design, build, finance, and operate the NSBT concession. Under the 45-year concession, during the last 10 years the Brisbane City Council was to receive 30% of the forecasted revenues of the NSBT PPP Project in exchange for a $503 million AUD cash contribution (to repay the council works facility) staggered over the construction period. Additionally, the sponsors elected to create a listed project company — RiverCity Motorway Group — in order to raise equity for the project. The initial public offering (IPO) for RiverCity Motorway did not meet expectations with shares debuting at $0.46 AUD instead of the initial $0.50 AUD installment price when it closed in late August 2006. Still, the IPO raised $693 million AUD in equity and attracted investors such as Macquarie Investment Management, AMP Capital, James Fielding, and ABN Amro Diversified Fund. The Leighton Contractors and Baulderstone Hornibrook Bilfinger Berger Joint Venture (LBBJV) was the contractor responsible for project implementation. Peron Group was contracted for project management. Sinclair Knight Merz – Connell Wagner Joint Venture was contracted for engineering, planning and environmental consulting. Maunsell Australia was contracted for traffic consultancy. Ancon was responsible for the design and manufacture of teh stainless steel suspension system that held the concrete slabs for the ventilation duct. Lindapter-manufactured steelwork clamps were used for the construction of the on/off ramps needed for the project. Pyrotek provided its Reapor its acoustic system to minimize noise from the traffic. EDAW-AECOM were the landscape artists. The project, including an overpass bridge, included a 13-meter long stainless steel ribbon wrapping a stair tower for the bridge in Woolloongabba called 'Epificus', designed by Brisbane artists Lincoln Austin. NLT Digital Solutions provided a equipment and personnel tracker system, environmental monitoring services for gas levels and airflow, and a fuel-usage monitoring system. Construction was planned to begin in September 2006 and the opening for the NSBT was scheduled for the end of 2010. Construction began in September 2006. Immediate controversy began over the positioning of the ventilation shafts for the tunnels in Woolloongabba and Bowen Hills; critics cited these as a potential environmental hazard. In December 2007, the Brisbane City Council elected to name the NSBT tunnel the M7 Clem Jones Tunnel (CLEM7) in honor of former and then-recently deceased Brisbane mayor Clem Jones. The tunnel opened to traffic on March 16, 2010. ABN AMRO, Bilfinger Berger, and Leighton sold down their equity commitments to retail investors in the project, and RiverCity was listed on the Australian Stock Exchange in 2007; a Leighton/Bilfinger joint venture remained responsible for the management of the road. After completion, RiverCity began to suffer financial issues. Reasons for the financial problems included the recession and financial crisis but, specifically, that the estimated traffic levels for the NSBT were greatly overestimated; by 2011, actual traffic levels were about a third of forecasts. The Leighton/Bilfinger began to convince the lenders to agree to a standstill agreement to half the project's debt to allow traffic levels — and revenue streams to increase. Many of the original 24 lenders for the NSBT Project sold their debt in RiverCity to investment banks and offshore hedge funds; by February 2011, RiverCity was owed debt to almost 30 banks and investment funds. On February 25, 2011, the RiverCity Motorway Group announced that the company would be placed into voluntary administration and liquidated after RiverCity failed to received approval from its bank syndicate for a requested standstill agreement in the interest payments on $1.3 billion AUD of debt, meaning that RiverCity would be unable to sign the banks' ratio certificate due at the end of February 2011, which would lead to a default. RiverCity's lenders appointed corporate recovery group KordaMentha as receivers of RiverCity, while PPB gained control of RiverCity Motorway, acting on behalf of the security-holders. While the road stayed open, the retailer shareholders in RiverCity were expected to be wiped out. The episode was called "an embarrassment to the Australian toll road sector", especially because it was thought that the NSBT PPP's structure would make it resilient to revenue shocks and that NSBT was financed in the trail of the bankruptcy of Sydney's Cross City Tunnel. Still, the PPP structure meant that the City of Brisbane and State Government of Queensland were not liable for RiverCity, although in exchange for a $503 million AUD contribution (that repaid the council works facility), the Brisbane City Council would receive a revenue sharing agreement for 30% of revenues in the last 10 years of the 45-year concession if traffic forecasts were rosy. As of 2011, revised forecasts expected 40,000 users of the tunnel per week day in 2020, compared to original estimates of 120,000 — an evident loss for Brisbane. In December 2013, Queensland Motorways Group acquired the CLEM7 Tunnel for $618 million AUD from RiverCity Motorway's receivers.