Allen & Overy's (A&O) Milan office has broken new ground in Italian project finance through its role advising the arrangers of a euro1.725bn (£1.057bn) no-recourse facility for Aeroporti di Roma (ADR), the project company of Rome's two airports.
The deal is the largest project financing in Italy to date and the first in the transport sector.
ADR was acquired by a private sector consortium in July 2000 when it was privatised by the Italian state holding company.
The acquisition was financed on a corporate basis. The latest bank facility was raised to refinance ADR's existing debt and debt raised by the consortium to purchase the ADR shares. The bulk will be kicked back up through the consortium companies as a dividend, refinancing the sponsors, while the remainder will be invested in the airport business.
“We have a reputation for doing the deals which seem to be impossible”
Franco Vigliano, A&O
A&O was instructed formally in mid-March by the arrangers, led by Barclays Capital and Mediobanca, with the full agreement of the sponsors, advised by Italian firm Giliberti.
A&O lead partner Franco Vigliano said: “We have a reputation for doing the deals which seem to be impossible.”
His team, which included five partners, faced a number of difficulties because of the lack of specific precedents for the structuring of the deal. In particular, there was no precedent for the project financing of a privately-owned company operating on a publicly-owned infrastructure. The team had to work with Italian legislation, including a maritime code, which had never been tested before for a no-recourse financing.
Vigliano said: “The difficulty was to structure a security package of full comfort to the banks that would be fully effective. The other difficulty was to draft these sorts of agreements from scratch because we didn't have precedents. The Italian law issues were the most difficult ones.
“We wanted to achieve a no-recourse financing, and we therefore had to make sure that the risk for the banks was fully ring-fenced. On the other hand, we didn't want to make life difficult for ADR,” he said.
In addition, the complex loan agreement was governed by English law because there was a large syndiction. Nevertheless, A&O's Milan-based English law section meant that the deal could be fully coordinated from Italy, where each of the major sponsors and banks have a presence.
“The novelty was that, out of a team of 18 lawyers, around 12 or 13 of them were based in Milan,” said Vigliano.