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Case Study

Silvertown Tunnel UK PPP

  • Rishin Patel headshot

    Authors

    Rishin Patel

    Managing Director
    Hedging and Capital Markets

    Infrastructure | London

Summary

Chatham was advising the largest UK PPP infrastructure project in 2019, connecting the London Blackwall Tunnel to the Royal Docks industrial area.

Key highlights

  • $1.2bn financing raised
  • 14 lender syndicate
  • BAFO pre- and post

Background

  • The project raised a total of GBP 1.2B across five fixed/floating debt tranches from 14 banks and institutional lenders.
  • Chatham benchmarked the underlying swap rates for each debt facility both pre- and post best and final offer (BAFO), and supported KPMG and Transport for London (TfL) up to financial close.
  • The chosen bidder at BAFO was the Riverlinx consortia (made up of ASI, BAM PPP, PGGM, Cintra & SK Engineering) advised by Macquarie Capital.
  • The project experienced several delays to achieve financial close, during a time of heightened volatility driven predominantly by political events.

Our approach

  • At pre-preferred bidder stage, Chatham ensured that both parties’ pricing in their financial models was based on the same underlying data.
  • By benchmarking each of the bidder’s risk solutions at the pre-preferred bidder stage, Chatham was able to negotiate competitive pricing for the execution and credit spreads ahead of financial close. Chatham ran this process while bidders were still competing to be mandated for the concession.
  • Given Riverlinx’s complex funding structure, which consisted of multiple funders and debt tranches, including banks and institutional investors, Chatham continued to benchmark pricing for the proposed hedging solution throughout the process.
  • Chatham agreed an acceptable financial close protocol with Macquarie Capital.

Benefits

  • Benchmarking with both consortia pre-BAFO ensured that TfL and KPMG knew ahead of time how the chosen bidder would price the hedging at financial close.
  • Chatham discussed optimal execution windows with TfL and advised on the benefits risks and considerations of entering the market at different times.
  • The execution of the project was successful, achieved its objectives and delivered a competitive result for TfL.
  • Financial close was smooth with several dry runs held in the run up.
  • TfL achieved competitive and fair pricing as a result of Chatham benchmarking rates during and up to financial close.

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About the author

  • Rishin Patel

    Managing Director
    Hedging and Capital Markets

    Infrastructure | London

Disclaimers

This material has been created by Chatham Financial Europe, Ltd. and is intended for a non-U.S. audience. Chatham Financial Europe, Ltd. is authorised and regulated by the Financial Conduct Authority of the United Kingdom with reference number 197251.