ICBC contributes to $3.95 billion AUD in syndicated loan facilities for the Sydney Airport Privatization (Linked to Record ID#97533)

Project narrative

On June 28, 2002, financial close was reached on a deal in which a syndicate of 20 banks — including China Construction Bank Corporation (CCB) and the Industrial and Commercial Bank of China (ICBC) — provided $3.95 billion AUD in senior secured syndicated loan facilities to Southern Cross Airports Corporation Pty Limited — a special purpose vehicle (SPV) and subsidiary of Southern Cross Holdings, a joint venture between Macquarie Airports (40% equity stake), Ferrovial Aeropuertos (20% equity stake), Hochtief AirPort (15% equity stake), Macquarie Airports Group (12% equity stake), Ontario Teachers' Fund (5% equity stake), Abbey National Treasury (5% equity stake), MTAA (2%), and Macquarie Global Infrastructure Fund (1% equity stake) — for the Sydney Airport Privatization. The $3.95 billion AUD of facilities was divided into four tranches: a $1.5 billion AUD bridge facility with a maturity period of one year; a $900 million AUD tranche with a maturity period of three years, a bullet repayment schedule, and an interest rate of BBSY plus an initial margin of 97.5 basis points (bps); a $1.350 billion AUD tranche with a maturity period of five years, a bullet repayment schedule, and an interest rate of BBSY plus an initial margin of 110 bps; and a $200 million AUD capital expenditure facility with a maturity period of three years and an interest rate of BBSY plus an initial margin of 97.5 bps. The loan facilities were secured by (i.e. collateralized against) a charge over the Sydney (Kingsford Smith) Airport assets, a fully funded six-month debt-service reserve, and a first claim on cash flows. The facilities also contained financial covenants mandating a cash flow coverage ratio of a minimum of 1.1 times and a gearing ratio maximum of 0.75 times. The $1.5 billion AUD bridge facility was refinanced by a $1.5 billion AUD multi-tranche MBIA-wrapped bond in October 2002. The $900 million AUD and $1.350 billion AUD tranches were drawn down to complete the acquisition. The $200 million AUD capital expenditure facility was intended for on-going airport development. Record ID#97533 captures CCB's contribution. Record ID#97534 captures ICBC's contribution. In addition to the two Chinese state-owned banks, the following lenders contributed to the loan syndicate: Barclays Capital, Commonwealth Bank of Australia (CBA), Royal Bank of Scotland (RBS), Société Générale S.A. (SocGen), Abbey National Treasury Services Plc (ANTS), Bank of America, BNP Paribas S.A., Citibank N.A., Credit Lyonnais, KfW, Norddeutsche Landesbank Girozentrale (NordLB), WestLB AG, Australia and New Zealand Banking Group (ANZ), the Bank of Tokyo-Mitsubishi (BTM), Credit Agricole Indosuez, National Australia Bank Limited (NAB), Sumitomo Mitsui Banking Corporation (SMBC), and Westpac Banking Corporation. Barclays Capital, CBA, RBS, and SocGen served as joint lead mandated arrangers. CCB, ICBC, ANTS, Bank of America, BNP Paribas, Citibank, Credit Lyonnais, KfW, NordLB, WestLB, ANZ, BTM, Credit Agricole Indosuez, NAB, SMBC, and Westpac served as arrangers. The loan was 100% oversubscribed in sub-underwriting, with sub-underwriters invited for commitments of $225 million AUD with upfront sets at 85 bps and $150 million AUD with upfront fees of 70 bps. The proceeds of the $3.95 billion AUD in senior debt were used by the borrower to support the $5.588 billion AUD ($3.19 billion USD) acquisition of Sydney Airports Corporation Limited (SACL), the lease-holder and operator of the Sydney (Kingsford Smith) Airport in New South Wales, from the Federal Government of Australia. In addition to the debt, the privatization was financed by $2.015 billion AUD in equity from the sponsors, and $600 million AUD in an Australian Securities Exchange (ASX)-listed hybrid security Floating IPO Exchangeable Reset Securities (FLIERS), which closed in early August 2002 and allowed the sponsors secure a larger bid price since the securities counted as Australian equity, allowing the Southern Cross consortium to meet the requirement that the airport by 51% Australian-owned. The tender process for the privatization of Sydney Airport was originally planned to be completed in late 2001, but due to the September 11 terrorist attacks the Federal Government of Australia deferred the process from September 2001 until March 2002, inviting three consortia to participate in the sale process. On June 25, 2002, Southern Cross had signed the purchase agreement for all ordinary shares in SACL for a purchase price of $4,233,014,000 AUD. The funding, including the senior debt, was directed towards financing the purchase price, as well as repaying SACL's existing debt, providing it cash reserves, and supporting debt issuance by it. Southern Cross Airports Corporation Pty Limited acquired SACL on June 28, 2002.