01/23/2012

The board of directors of the Brazilian Development Bank (BNDES) has approved the basic financial support conditions for public services concessions  in expanding, maintaining and exploring the international airports in Brasilia (Federal District), Campinas and Guarulhos (satellite cities both in the state of São Paulo).

The concession process for airport aims to, besides improved operational efficiency, ensure the expansion capacity required to meet increased demand, especially in light of the 2014 World Cup in Brazil. Starting with the concession of the International Airport in São Gonçalo do Amarante (state of Rio Grande do Norte), whose auction was held in 2011, the process seeks to consolidate a new management model in the industry.

The Bank put together financial projections for the three airports based on investments and costs identified by the study conducted by the Brazilian Project Structuring Company (EBP), and coordinated by Accenture, to comply with the BNDES’ support conditions.

The Bank's participation may occur through corporate support (directly to companies) or in the form of Project Finance, through the creation of a Special Purpose Company (SPC).

Participation and financial cost - The BNDES' support is limited to 80% of total investment and 90% of eligible items, according to its operational policies, and 70% in TJLP (long-term interest rate) and 20% in other currencies, such as the Selic (Special Custodial and Clearing System), the IPCA (Broad Consumer Price Index) and the basket of currencies, plus other fees.

The BNDES’ basic spread will be 0.9% per annum, plus the operational risk rate, which can range from 0.46% to 3.57% per annum. More details can be found at this link (article in Portuguese).

The Bank requires proof of technical, economic and financial capacity of entrepreneurs to implement the project. Among the requirements for ownership through the Private Equity Investment Fund (FIPs), there is the identification of shareholders, managers and administrators. The BNDES may share project guarantees with other long-term financiers.

Usage Term - Up to 84 months, with a six-month grace period. Financing will be structured in installments (tranches) based on the characteristics of investments. Interest will be paid quarterly during the grace period.

Full term for financing, including the bridge loan:

• Airports in Guarulhos and Brasilia: up to 180 months.
• Airport in Campinas: up to 240 months.

The projects have different concession terms - 20 years for Guarulhos, 25 years for Brasilia, and 30 years for Viracopos.

A bridge loan is expected, whose cost will be the BNDES’ basic spread of 0.9% per annum, plus TJLP, plus 1% per annum and a credit risk rate.

The Bank requires proof of technical, economic and financial capacity of entrepreneurs to implement the project.