The Sacyr and OHL owned SPV behind the USD 945m Avenida Vespucio Oriente (AVO I) road has mandated four local banks to raise debt to fund the project, three years after winning the project.
The SPV Sociedad Concesionaria Vespucio Oriente has requested debt worth UF 19.5m (USD 823m), according to two sources briefed.
BCI, BancoEstado, Banco de Chile and Itaú Corpbanca would potentially underwrite 25% of the debt and then analyze alternatives to add lenders and investors to the deal.
An additional source briefed said sponsors and banks are studying debt structure and term alternatives, with strong odds in favor of long-term, multi-tranche bonds and loans.
However, evaluations are underway regarding the level of bank exposure to the sponsors. Chile’s regulatory framework puts a limit of 10% for risk-weighted assets on banks.
The banks are also studying new regulations in Chile that allow pension funds to participate directly in credit facilities for alternative assets. The new regulation became official on 2 November.
The pension funds’ preference for long-dated tenors could help banks reduce their exposures, if local institutional investors join credit syndicates or buy project bonds, a source said. But as pension funds tend to be more risk-averse investors, this alliance is still uncertain around a greenfield project with the complexity of AVO I, a second source added.
The transaction will be backed by availability payments from the government and cash flow from the toll roads.
In 2014, the SPV signed with the Ministry of Public Works a 40-year contract to add a 9.3km, three-lane tunnel to the northeastern part of Santiago’s ring road between Av. El Salto and Av. Príncipe de Gales. The project has faced delays related to its environmental license.
Spanish builders Sacyr and OHL own the SPV.
OHL declined to comment. Sacyr did not reply on time for publication.
All banks declined to comment.