Financing of the Américo Vespucio Sur toll road project in Chile

Jones Day Madrid has advised Spanish construction giants Sacyr Vallehermoso, S.A. and Acciona, S.A. (the "Sponsors") and their jointly-owned Chilean subsidiary Sociedad Concesionaria Autopista Vespucio Sur, S.A. (the "Project Company") in the development and financing of the Américo Vespucio Sur Toll Road in Santiago, Chile. The Vespucio Sur Project was the fourth of the Santiago urban toll road projects to reach financial close and achieved the lowest pricing in the history of Chilean infrastructure financing.

The Project Company issued project bonds on November 11th at a record-low interest rate of 4.59% and were over-subscribed by 20%. The bonds were insured under a financial insurance policy issued by XL Capital Assurance Inc., and formed part of a complicated multi-tranche financing structure involving a direct loan from Instituto de Crédito Oficial of Spain, a discounted sale to Banco Santander-Chile and Santander Investment Chile Limitada of payment obligations of the Ministry of Public Works ("MOP") and a value-added tax credit line provided by Banco Santander-Chile. Project costs are estimated at a total of $670,000,000, with debt arrangements covering over $500,000,000.

The Chilean Government awarded the Concession to Acciona and Sacyr in 2001 and the parties later signed an amendment to the Concession requiring the Project Company to perform additional works, including the construction of a metro line along the route of the highway. These new works basically doubled the cost of the project, and led to difficult negotiations with the MOP relating to the establishment of an acceptable payment mechanism for the increased cost of the project. The MOP ultimately agreed to issue irrevocable payment obligations based upon the progress of the works, which the Project Company will sell on a discounted basis to guarantee the receipt of necessary funds to pay construction costs. Banco Santander-Chile acted as financial advisor and will purchase these MOP obligations throughout the construction period.

This financing is also notable for the participation of Instituto de Crédito Oficial ("ICO") as a direct, senior lender and Banco Santander-Chile, as VAT credit line provider, in each case without the wrap of the financial insurance policy. This represents a departure from the financing structure of the other toll roads in Chile, which normally relied on the insurance coverage for these tranches of debt.

Attorney Richard Puttré commented: "The additional works obviously increased the construction funding requirements, but the final agreement with the MOP made it possible to access funds as needed during the construction period. After a long negotiation process and careful structuring of various debt products, the Sponsors achieved a highly-efficient financing, denominated totally in Chilean currency. The demand for the bonds and their very low interest rate together with the participation of ICO without the financial insurance wrap underscore the strength of the Sponsors and the prospects of the project."

Richard P. Puttré, a New York-licensed attorney in the Madrid office of Jones Day represented the Sponsors and the Project Company. Debevoise & Plimpton (Craig Bowman) acted as New York counsel to XL Capital. Philippi, Yrarrázaval, Pulido & Brunner (Andrés Sanfuentes) acted as Chilean counsel to the Sponsors and the Project Company while Claro & Cía. (Jorge Martín) represented XL Capital for Chilean matters.