Latin America Loan: Metro de Panama’s US$2bn loan

IFR Awards 2021
3 min read
Rhys Adams

Right on track

Faced with raising a US$2bn-equivalent term loan that outstripped the lending capacity of its traditional relationship banks, Metro de Panama cleverly structured the financing in order to draw on as wide a pool of global lenders as possible.

Global coordinator Citigroup also managed a tight timeline and the diverse procedures of Latin American and Asian lenders to complete a deal that backs the company's Line III development.

“Given the scale and size of the transaction, it needed to have a multi-faceted solution,” said Chris Gilfond, head of capital markets origination for Latin America at Citigroup.

That solution was to draw on the support of South Korean and Japanese institutions, as well as structuring the facility with a special purpose vehicle as the borrowing entity. The SPV structure bypassed the time-consuming bureaucracy of registering every lender directly with Metro de Panama and enabled the syndication to be opened to a much wider liquidity pool.

The SPV is backed by Certificados de No Objecion, a note of unconditional payment obligation issued by Metro de Panama, with a guarantee from the government of Panama.

The financing featured US$1.05bn of South Korean export credit agency covered funds, along with a US$950m commercial tranche. The expanded liquidity pool included South Korean ECAs because of their national connection to the project sponsor consortium which comprised Hyundai Engineering & Construction, Posco Engineering & Construction, and Hyundai Engineering.

Japanese institutions also provided liquidity as Japanese companies will provide rolling stock for the future metro system.

“The structure allows us to open financing to basically all market participants, so that gave us the idea that we could scale up and do a significantly larger deal because we had different players that we didn’t have prior to last year,” said Adrian Guzzoni, head of Latin America syndicated and leverage financing at Citigroup.

The loan marks successive IFR awards for Metro de Panama. Last year it won the award for Latin America loan with a US$316m term loan, also led by Citigroup.

The financing for the 2021 public transportation project also ticked ESG boxes. Review processes of the project’s environmental impact – including deforestation and population displacement – were leveraged to achieve an ESG designation for the loan package.

The financing is also classified as a green use-of-proceeds facility as the project being funded is expected to reduce greenhouse gas emissions by providing an alternative transport option to cars.

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