The Inter-American Development Bank today announced the successful conclusion of its first financial guarantee in support of a local currency bond issue for the equivalent of US$300 million to finance the upgrading of the toll road linking Santiago, Chile, with the port of Valparaíso.
The IDB guaranteed a $75 million portion of the issue, its first such operation in support of the private sector, and Financial Security Assurance, Inc., of New York is co-guaranteeing the remaining amount. Santander Investments Chile Ltda. is the arranger and placement agent.
"This financial guarantee accomplishes several development goals simultaneously," commented Hiroshi Toyoda, manager of the IDB Private Sector Department. "In the first place, we are supporting the growth of the private sector and infrastructure development. Secondly, we are developing a new long-term financial instrument that can be replicated in other countries in Latin America, and thirdly, we are assisting a country to assume debt in its national currency, which is more advantageous compared with a foreign currency."
The issue before the IDB/FSA credit enhancement has been rated Baa2 by Moody’s, which is the highest investment grade rating ever given to a toll road project in Chile. This is also the largest infrastructure bond sold primarily to Chilean pension funds and insurance companies, paying a coupon of 6.02 percent on the Unidad de Fomento, a Chilean debt instrument.
The project being financed includes the upgrading of the 110-kilometer toll road linking Santiago with Valparaíso, the expansion of a 2.3 kilometer road (Ruta Las Palmas) linking Valparaíso with Viña del Mar and the construction of a new, 18 kilometer road (Troncal Sur) linking Viña del Mar with the cities of Quilpué, Villa Alemana and Peñablanca. Among the new works will be two new parallel tunnels, eliminating a bottleneck in which four-lane traffic is stalled at tunnels that now serve only two lanes, and the construction of toll plazas and pedestrian bridges. The total project cost is approximately of $416 million. Project sponsors are ACS and SACYR from Spain.