Clifford Chance

Clifford Chance advises on Paraguay's first PPP project with novel financing for the Rutas 2 and 7 toll road

International law firm Clifford Chance advised Goldman Sachs and the Inter-American Investment Corporation ("IDB Invest") on the up to US$657.6 million hybrid financing for the design, rehabilitation, construction, operation and maintenance of the "Rutas 2 and 7" toll road project in Paraguay, which is owned by Sacyr Concesiones and Ocho A.

This project, the first-ever public-private partnership ("PPP") in Paraguay, adds to the Firm's unrivalled experience in Paraguayan infrastructure financing. Earlier this year, the team worked on the landmark financing of the "Corredor Bioceanico" toll road, the first international project bond in Paraguay.

The financing of Rutas 2 and 7 involves a complex multi-tranche structure that combines a securitization of government receivables with a letter of credit facility and a project financing. The US$457.6 million securitization was structured by Goldman Sachs and implemented through a 144A/Reg S bond offering, with Goldman Sachs acting as global coordinator and joint bookrunner and Itau BBA acting as joint bookrunner. The combined US$200 million project financing and letter of credit facility was arranged by IDB Invest and included the International Development Bank ("IDB").

The financing breaks new ground in that it includes a letter of credit facility provided by a multilateral lending agency to fully support advances to a project company using bond proceeds to finance working capital. The structure achieves the double purpose of eliminating construction risk from the perspective of bondholders, while reducing negative carry by eliminating the need for a separate working capital facility.

"We are very pleased to support both Goldman Sachs and IDB Invest in the creation of a sophisticated product that has the potential to open new opportunities in Paraguay and other Latin American countries where access to the international capital markets to finance infrastructure remains limited," said Banking & Finance partner Guido Liniado. "By leveraging the status of IDB Invest as a multilateral lending agency with a robust credit rating, this innovative structure allocates risks efficiently to reduce financing costs and provide the protection required to attract institutional investors."

Rutas 2 and 7 is the first project finance transaction for which IDB Invest and IDB have provided a letter of credit facility.

Senior associate Alberto Haito said, "IDB Invest showed great flexibility and dynamism in providing a first-time letter of credit facility that coexists with a long-term project finance facility and is tailored for the securitization of government receivables. The structure sets a new standard in the region, and we anticipate that it will be replicated in future financings."

In addition to financing the construction of the remaining works, the proceeds of the bond offering were used to repay the bridge financing for the project, known as "Tramo 0," which Clifford Chance helped structure in 2017 as the first local financing to include project finance features.

Rutas 2 and 7 represents the largest-ever private investment in Paraguayan infrastructure. "The bridge and long-term financings for Rutas 2 and 7 build upon our deep experience with incorporating best practices to bring to market the first infrastructure and energy financings in a country," said Banking & Finance partner Gianluca Bacchiocchi. "This includes the securitization of government receivables in Peru and Panama, the 4G multisource financings in Colombia, the RenovAr project financings in Argentina and the public works securitizations in Paraguay. The international financing of projects under new frameworks requires a lot of problem solving, and the Rutas 2 and 7 financing was no exception."

Clifford Chance's cross-practice and bilingual team worked across the Firm's offices in New York, Washington, DC and Madrid.

Liniado and Bacchiocchi led the New York-based team representing Goldman Sachs, assisted by associates Mariana Estévez, Andrés Berry, Nicolas Ocampo and Edwin Ramirez-Homs and foreign law clerk Alvaro Rojas. Partner Avrohom Gelber and associate Dan Borchert advised on tax matters; counsel Paul Koppel and associate Thomas Koh advised on ERISA; and counsel Ashwini Habbu provided regulatory advice.

Partner Fabricio Longhin led the DC-based team representing IDB Invest, working with Haito and associates Pablo Fekete and Julian Hurtado Vallejo.

The Firm's team in Madrid, led by partner Jose Guardo and including associate Marta Ruiz, handled the project development and construction matters.

Clifford Chance has been recognized for decades as a preeminent law firm in Latin America, renowned for successful, novel financing structures and its signature ability to drive innovation across the entire region. The Firm's dedicated Energy & Infrastructure team is comprised of bilingual and culturally fluent lawyers who understand Latin America's distinct business, legal and regulatory landscapes, as well as the evolving needs of a diverse client base. The group works seamlessly across practices on matters involving project development and the delivery of cutting-edge finance and capital markets structures. Uniquely, the team is adept at developing sophisticated, multisource financings, both through project-finance and -bond structures and securitization schemes that involve a combination of commercial banks, multilateral lending agencies and the bond markets.