The £2.95bn Metronet transaction is the largest public-private partnership (PPP) deal in the world to date. It saw London Underground award a consortium of five firms a 30-year contract to maintain and upgrade the sub-surface and deep-level lines, representing about two-thirds of the entire underground infrastructure.
An innovative capital structure was required, incorporating the use of two parallel debt structures to two concession companies, with responsibility for different sections of the network, providing for acquisition, capex and cost over-run liquidity facilities, all underpinned by credit support from Transport for London. Complicating matters, the extent and scope of necessary upgrades to lines is uncertain.
The financing was achieved through a multi-tranche structure that included a bond issue, a syndicated loan and also a loan from the European Investment Bank.
Of particular note was the tough political mood at the time, with fierce resistance voiced against any kind of priv-atisation. Despite this, syndication proved a success, with 15 banks committed (in addition to four mandated lead arrangers) and full subscription achieved.
