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4| pfi | Middle East Report 2009 F1 financing

The broad structure of the

financing entailed guarantee faciliites of approxi- mately Dh500m (US$136m)

The full track design allows for an average speed of 198 km/h, and incorporates a marina and state-of-the art sta- dia. This will allow more than 150 yachts to berth along- side the track as it wraps around the island marina, again emulating one of the most exciting portions of the Mona- co Grand Prix. The designers have incorporated the lat- est technologies and safety features from the most advanced circuits in the world and the spectator sec- tions will be able to hold more than 50,000 spectators, each with a guaranteed 40% view of the whole track, which is more viewing span from a single position than any other track in the world. The Emirate is hoping that the track and surrounding development will attract up to 3m peo- ple by 2015 and plans to market the whole of the Yas Island development as an international tourist destination, attracting visitors from across the Gulf and worldwide.

The contractor financing structure As is common in Middle East construction contracts, Aldar stipulated that the contractors issue certain bank guar- antees to the approximate value of the construction costs on a milestone basis. In order to spread the con- struction risk, Cebarco WCT approached banks and financial institutions to underwrite the risks of the proj- ect, and agreed terms with Mashreq Bank PSC, BNP Paribas and HSBC Bank Middle East Ltd for a facility of Dh750m (US$204m). Mashreq Bank acted as lead arranger and both facility and security agent, while BNP and HSBC equally participated in the master finance facilities. The broad structure of the financing entailed guaran- tee facilities of approximately Dh500m (US$136m) and included advance payment guarantees, performance guarantees and retention guarantees to be issued in favour of Aldar. The remaining Dh250m (US$468m) was allocated by the banks to a letter of credit facility and a short-term loan for civil works and the procurement of equipment and materials. The short term facility is to be utilised for any refinancing under the letters of credit and drawn against the progressive payment certificates sub- mitted by Cebarco WCT. The margin for the advances under the short-term facility was set by the lenders at 150bp over the Emirates interbank offered rate corre- sponding to the selected interest period by Cebarco WCT. Mashreq Bank, in its capacity as the facility agent, issued the bank guarantees and letters of credit, on the basis of the participating lenders-funded counter-guar- antees and indemnities, and the relevant commissions were divided proportionally between the lenders. As this was one of Cebarco WCT's first projects in the

UAE and given that Cebarco WCT was a single purpose entity, with limited credit history, the lenders required both the principal members of the joint venture to sup- port the project facilities by signing the master facilities agreement, in their capacity as corporate guarantors, and by maintaining the required tangible net worth and

gross gearing ratios as stipulated by the master agreement. The lenders also required the joint venture to submit peri- odic financial statements, project progress reports and other cash collateral connected with the project's progress.

Interim financing arrangements In 2009, Abu Dhabi will hold the final race of the Formula 1 season, supplanting Brazil's Interlagos circuit, which has traditionally had the honour of hosting the closing race of the season. To do so, it was imperative that construction began on time, therefore the lenders agreed to issue cer- tain bank guarantees while the master agreements were still being negotiated and even before the formal signing of the construction contract. At that stage, Cebarco WCT was awarded the tender on the basis of a letter of award that was valued at 10% of the contract price. After various nego- tiations, the lenders entered into a short-term interim arrangement to secure the bank guarantees by agreeing a syndicated assignment of the project proceeds arising out of the value of the letter of award. Once the construction contract and master project facilities agreements were finalised, the interim assignment would fall away.

Securities and collateral

The master facilities were secured primarily by the cor- porate guarantees by Cebarco Bahrain and WCT Engi- neering, as the lenders were mitigating the credit risk by relying on the stable financial condition of the two prin- cipal companies and their improved credit assessment. The lenders obtained an assignment of the project pro- ceeds arising out of any payments made by Aldar under the construction agreement as secondary security, and stipulated that the assigned proceeds should be deposit- ed into to the project collection account maintained by the joint venture with Mashreq Bank, as security agent. The lenders also obtained assignment of the project insurances in place by Cebarco WCT, and the bank guar- antees issued by the subcontractors appointed by Cebar- co WCT for the project as further security.

Facility documentation

The master facility documents and the security assign- ments were governed by UAE law, given that substantial assets of Cebarco WCT, as well as the project itself, are based in Abu Dhabi. The corporate guarantees issued by Cebarco Bahrain and WCT Engineering were prepared under the laws Bahrain and Malaysia respectively. The financing arrangements lasted approximately three years from the issuance of the guarantees under the master facil- ities arrangement, and conclude on the issuance of the final acceptance certificates by the project consultants appoint- ed by Aldar. As the construction project draws to a close with official commissioning of the circuit scheduled for the last quarter of 2009, the master project facilities will also mature and will be successfully terminated.

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