When the Macquarie and Eiffage consortium, Eiffarie, won a controlling stake in APRR, the highly leveraged French motorway company, Eiffarie knew it needed to gain quick access to the market to refinance APRR's loans. Eiffarie's team established a €6bn euro medium term note programme, and then in mid-November 2011 decided to return to the market with a €500m four-year deal to help repay its oustanding acquisition loan. The result defied even the most optimistic expectations.

APRR is one of Europe’s largest motorway operators, responsible for some of the busiest toll-roads in France, which stretch more than 2000 kilometres across the country. State-owned until 2006, APRR was taken private by Eiffarie, an acquisition vehicle comprising Paris-listed infrastructure group Eiffage and Australian bank Macquarie. The takeover included a €3.8bn acquisition loan, maturing in 2013. Not surprisingly, given market conditions, Eiffarie is keen to refinance this debt sooner rather than later.

“We intend to refinance our acquisition loan one year ahead of maturity so our plan is to repay €1bn and refinance the remaining €2.8bn via a new bank loan,” says Philippe Delmotte, head of investor relations at Eiffage.

Heavily leveraged, APRR has a Baa3/BBB- credit rating. Although this rating is stable, it is hardly conducive to easy issuance, especially in the current market environment “In order to make the repayment, we need to upstream cash from APRR so instead of waiting until next year, APRR decided to seize windows of opportunity in the market, raising in excess of €2bn at decreasing coupons in 10 months during 2011,” says Mr Delmotte.

Swift market access

APRR is no stranger to the bond market. Before Eiffarie took control of the business, it had access to state-backed finance, via the Caisse Nationales des Autoroutes. A series of loans were taken out, the last of which matures in 2018. Knowing these would need to be refinanced, Eiffarie established a €6bn euro medium-term note programme so it would be able to access the market swiftly if need be. The company has issued bonds through this programme several times, including a €1bn, six-year deal in January 2011 and a €500m, 7.5-year transaction five months later.

By August of 2011, Eiffarie knew it wanted to return to the market, with a €500m four-year deal to help repay its outstanding acquisition loan. “We were looking at the market on a daily basis and we thought mid-November to mid-December would be a good opportunity for a BBB borrower like us. We knew the market would close from mid-December and we wanted to be ready irrespective of market conditions,” says Mr Delmotte. “It was a delicate balance between waiting to see if conditions improved or issuing when conditions were sub-optimal but a deal could get done at a good price. In the end, we chose not to take a risk and to go when we could access the market,” he adds.

The decision was difficult. In January, APRR’s bond issue was launched at a spread of 45 basis points (bps) over mid-swaps. By May, the spread had increased to 170bps and by November, APRR’s bankers were proposing a spread of 275bps, about 45bps higher than the company’s bonds were trading on the secondary market.

Even at this level, a successful deal was far from assured. On November 15, conditions seemed marginally more benign than they had been in previous weeks and APRR’s book-runners began to make preparations. The company has a group of close banking relationships, particularly with Société Générale and Natixis, and in this transaction it turned to these two banks as well as BBVA, BNP Paribas, Lloyds Banking Group, Santander and Mitsubishi UFJ.

We selected this group on the basis of their ability to tap different investor bases, not just in France but in Spain, the UK and other parts of Europe

Philippe Delmotte

“We selected this group on the basis of their ability to tap different investor bases, not just in France but in Spain, the UK and other parts of Europe,” says Mr Delmotte.

Oversubscribed offering

On the morning of November 16, the book-running team was still unsure whether a deal would fly. The market had opened on a lacklustre note and investor sentiment was weak. At 9.30am continental European time, the banks decided to sound out three or four key investors to see if they would be interested in APRR paper and if so, whether a 275bps spread was sufficiently attractive. Initial responses were positive, the market stabilised during the morning and at 11am, the books opened. Within 20 minutes, the €500m target had been reached and by the time the books closed at 12.15pm, the company had attracted more than €2bn of orders from 261 different accounts. The oversubscription allowed APRR to reduce pricing to a spread of 270bps, giving a coupon of 4.375%.

APRR was both pleased and relieved with the result. “The spread was clearly much higher than at the beginning of the year but interest rates have come down so the coupon on this deal is lower than we achieved in January, when we paid 5% and in May, when we paid 4.875%. In fact 4.375% is the second lowest coupon in APRR’s history,” explains Mr Delmotte.

For APRR, keeping investors sweet is an important consideration. The company expects its credit rating to improve as it deleverages but that deleveraging process will require a series of transactions. With this in mind, pricing has to err on the side of generosity, particularly in the volatile environment of today.


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