Autopista al Mar 2’s $658 Million Financing
A consortium led by China Harbour Engineering Company Limited secured the approximately USD 658.2 million multicurrency financings of the Concesión Autopista al Mar 2, a toll road project in Colombia (“Mar 2”).
The financing is the first private investment made by a Chinese construction company under Colombia’s 4G highway infrastructure program, and also marks the first financing made by China Development Bank (“CDB”) under the 4G program. The program seeks to modernize Colombia’s highway system by improving existing roadways and constructing approximately 7,000 kilometres of new roads.
Interview with Zhen Yueneng at Tian Yuan
Please tell me about your involvement in the deal?
As the PRC legal counsel of the banks, Tianyuan provided the banks with the professional legal services, which included (i) reviewing various kinds of transaction agreements, (ii) assisting the banks in any required procedures under the PRC law, (iii) communicating with the borrower(s) and their PRC counsel in relation to the legal issues and any required procedures under the PRC law. Further, we assisted the banks in handling such legal issues within the work scope of our engagement from time to time.
Why is this a good deal for all involved?
The borrower benefits from the transaction as they are provided with financing for its Mars 2 project in Colombia, which will contribute to the expansion of their business and market size in Colombia.
For the banks, given the scale of this debt financing, this transaction shall enlarge the scale and portfolio of the banks. Further, we anticipate that this transaction will facilitate the borrower/banks in their cooperation with international banks.
For Tianyuan, our participation in this transaction has broadened our international horizon by extending our reach to transactions in Colombia, and we also gained valuable experience in cross-border debt financing. Further, working together with professional teams from multiple jurisdictions in this deal, which went very smoothly, has strengthened our communication skills, benefiting our future cross-border deals.
Currently, the Chinese government encourages Chinese enterprises to go global, and actively promotes enterprises to establish friendly collaborations with foreign companies.
What challenges arose? How did you navigate them?
The transaction structure of this project was very complex. As such, many transaction documents were applicable for standard templates. Given that the legal issues that arose were uncommon, we did not have any precedents as reference, which made the communications with the relevant government authorities crucial, but time-consuming, as the competent government authorities must go through specific research and discussions internally in relation to the transaction structure and legal issues therein, in order to give proper guidance. We highlighted this challenge to the working teams and liaised with government authorities, including but not limited to conducting face-to-face interviews with government officials.
Further, there were multiple parties involved in China, the United States, Japan, and Colombia. Therefore, having to consider the laws and regulations of multiple jurisdictions involved, efficient and timely communication with working teams was very important. For instance, as the banks’ offshore legal counsel is based in the United States, there is a 12-hour time-zone difference between us. In order to promptly respond to their queries, we had many mid-night conference calls and email correspondences.
How does this financing represent China’s current economic climate? How is it progressing in 2019?
Currently, the Chinese government encourages Chinese enterprises to go global, and actively promotes enterprises to establish friendly collaborations with foreign companies. In the financing area, China also applies the same open policy, hoping to strengthen cooperative relationships with other countries. As this transaction involves enterprises from China, Colombia and Japan, the success of this project reflects China’s going-global policy. In 2019, China has further strengthened international cooperation. On 31 July 2019, the China-Colombia Economic and Trade Forum was successfully held in Beijing, where the two countries reached a consensus to promote and enjoy broad economic, trade cooperation prospects in the fields of trade, investment and tourism.
The project has successfully completed with the support of the efforts from China Development Bank.
This transaction marks the first financing made by China Development Bank (“CDB”) under the 4G program; what are the positives of this program and how did it impact your client?
Indeed, the transaction is part of the Colombian “4G Road Network Project”. Upon the completion of the project, the cost of import and export in Colombia will be largely reduced, and the economic development along Mars 2 highway will improve. On the one hand, in recent years, China and Colombia have gradually strengthened cooperation in various industries. The progress of this project is also one of the achievements of the two nations in strengthening their cooperation. The China Development Bank, as a policy bank in China, has provided high-quality financing services for the project. Undoubtedly, it will actively promote cooperation and strengthen the friendly relationship between the two countries.
On the other hand, with China’s policy of going-global, the “One Belt, One Road” initiative will bring China and other countries closer in the near future. The project has successfully completed with the support of the efforts from China Development Bank. This project experience will be a great foundation for future international cooperation and will help the China Development Bank provide better services for Chinese enterprises to “go-global” in the future.