CMS Cameron McKenna is advising the consortium Metronet on its £1.2bn bond issue, which will be used to finance its acquisition of two-thirds of London Underground's infrastructure.
Project finance partner Andrew Ivison will lead a team that was appointed as Metronet's adviser following a competitive tender process 18 months ago. Metronet was only selected as one of two preferred bidders at the beginning of May.
The bonds will be underwritten jointly by Deutsche Bank and UBS Warburg, which will be advised by Ashurst Morris Crisp.
Metronet is negotiating its own credit rating with Standard & Poor's and Moody's. However, the bonds will be rated AAA because of the monoline insurance, guaranteed by Ambac Financial Services and Financial Security Assurance.
It will raise another £1.2bn from bank loans and has a further £600m in equity from shareholders, which include Bombardier Transportation, Balfour Beatty, Seeboard, Thames Water and WS Atkins.
|The cost of borrowing is unclear, given the confusion surrounding the Government's pledge to guarantee the funding|
Tube Lines, the consortium that will acquire the remaining third of the Tube system, has £300m in equity and will raise £1.7bn in bank loans. The consortium is being advised by Lovells, while the lead arrangers – Dai-Ichi Kangyo, Halifax Bank of Scotland, Société Générale and WestLB – are being advised by Norton Rose.
The plans were approved by the Government earlier this month and are now at the consultation stage. However, London's Lord Mayor Ken Livingstone has voiced his opposition to the public-private partnership and it seems likely that there will be a number of changes before a contract is signed sometime in March.
Transport Secretary Stephen Byers gave the go-ahead to the plans, despite London Underground's decision that it would provide better value for money if it were to remain wholly in the public sector.
The cost of borrowing is unclear, given the confusion surrounding the Government's pledge to guarantee the funding. The bidders claim that the Government has underwritten 95 per cent of Tube borrowing. However, in practice, they have only been given a comfort letter.
It still remains uncertain whe-ther the guarantee actually exists or whether it is just the present indications of the Transport Secretary.
Until the Government makes a decision one way or the other, it will be impossible to estimate the actual costs of funding.