A syndicate of ten commercial banks and development agencies has secured financing for the US$3 billion São Paulo Metro Line 6 project in Brazil.

Featuring a pioneering and innovative financing structure involving a complex set of letters of credit (L/Cs) and guarantees under the laws of five jurisdictions, it is the largest public-private partnership (PPP) project currently under construction in Latin America.

Multiple jurisdictions

Senior lenders advised by global law firm White and Case comprise Brazil's National Bank for Economic and Social Development (BNDES) and a syndicate of ten commercial banks and development agencies in connection with the non-recourse senior secured financing.

The complex set of L/Cs and guarantees under Brazilian, New York, Spanish, French and Italian laws cover a portion of the construction risk and enabled the Brazilian development bank, BNDES, to provide its first ever limited recourse project financing in local currency for an infrastructure PPP in Brazil.

Precedent setting

The financing structure is expected to become a precedent in the country that could open the doors for long-term project financing to foreign financiers and investors looking to participate in Brazil's infrastructure sector.

The project consists of the construction, operation and maintenance of a new 15.3 kilometre subway line and 15 new subway stations.

Project package

São Paulo Metro Line 6 will be developed and operated by Concessionária Linha Universidade, a special purpose company owned by Spanish multinational conglomerate Acciona (47 per cent), Société Générale (39.7 per cent), STOA (12.3 per cent) and Transdev (1 per cent).

Total project cost is approximately US$3 billion with the project financing package comprising US$1.4 billion and the State of São Paulo contributing approximately US$1.7 billion.

Established in 2017, STOA is an impact fund created by French development agencies Caisse des Dépôts (CDD) and Agence Française de Développement to finance infrastructure in emerging and developing countries. Majority owned by CDD, Transdev is a French-based international private-sector public transport operator.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.