A Eurobond deal is expected by the end of the year for airports group Aerodom, which is set to be one of the biggest investors in the Dominican Republic in the next few years. One of the Dominican companies leading the charge in bringing groundbreaking financing into the country is Aerodom, the private airports operator.
Aerodom has already secured $30 million of financing from Citibank to finance construction work. “It was the first time something like that, in terms of the amount or the structure, had been done in the Dominican Republic,” recalls Lawrence Hazoury, treasurer of the board of directors of Aerodom.
Now the consortium – which as well as Dominican investors includes Vancouver Airport Services and Impregilo, the Italian construction company – is looking to bring another innovative transaction to market. The deal has the involvement of Banca IMI, the investment bank of Italy’s SanPaolo-IMI banking group, and the Inter-American Development Bank.
Hazoury describes the expected Eurobond issue as, “A fairly unique transaction – a combination of project finance and securitisation at the same time.” The project finance involves plans to redevelop the group’s airports and build new ones. The securitisation involves receivables such as airport landing fees and passenger fees, which will still be earned even as some airports in the group are redeveloped. Banca IMI’s plan is for those flows to reduce investor risk. The aim is to complete the issue, around $160 million over 10 years, by the end of 2001.
Those familiar with the deal believe Aerodom will be the first Latin American airport operator to go to the Eurobond market. A special-purpose financing vehicle will be set up to issue the bond and on-lend to Aerodom.
The I-ADB’s private sector department will provide bondholders with a guarantee to cover risks including currency convertibility – should the Dominican Republic for any reason decide to impose exchange controls – and possible non-payment of the compensation that would be due were there an early termination of Aerodom’s concession to run the airports.
Another novelty of the proposed deal is that it will be the first time that the I-ADB, which has moved more heavily into providing private sector guarantees for loans in recent years, issues this type of guarantee for a capital markets or securities-based transaction.
With the backing of the I-ADB, Banca IMI hopes the bond will receive an investment-grade credit rating: far above the Dominican Republic’s sovereign rating. “The guarantee is going to be very influential,” said an IMI source.
Hazoury says it is obviously a big help to come to market so soon after the Dominican Republic’s debut sovereign issue. “It was placed with a lot of acceptance. It was oversubscribed. It was a presentation of the Dominican Republic and it sold our country in Europe and in the main US markets. Obviously it smoothes the path for us,” he says. Acknowledging that the Dominican market has become a lot more sophisticated, Hazoury says: “The market itself is demanding these types of structures. We have a lot of demand to satisfy and that means heavy investment.”
The Aerodom consortium was originally awarded a 20-year concession to develop and operate four airports in the Dominican Republic. The airports, which include Las Americas international airport at Santo Domingo and Puerto Plata’s international terminal in one of the country’s main tourist areas, handled around 4.6 million passengers last year. Las Americas and Puerto Plata account for around three-quarters of traffic.
The concession contract has subsequently been extended to 25 years and it includes two more airports. Vancouver Airport Services says the consortium will invest more than US$400 million to upgrade and modernize the airports: a key element in the tourism on which the Dominican Republic so heavily depends.