White & Case and Clifford Chance have pooled talent from multiple offices to advise on $657 million in financing for Paraguay's first public-private partnership: the National Routes 2 and 7 road project.

White & Case advised Spanish construction firm Sacyr Concesiones and its local partner Ocho for the Rutas del Este project. The firm worked on all aspects of the transaction, including construction, operation and management arrangements, as well as the securitisation structure, the capital markets financing and the project financing.

Clifford Chance, meanwhile, advised Goldman Sachs and the Inter-American Investment Corp. (IDB Invest) on the hybrid financing for design, rehabilitation, construction, operation and maintenance of the roads.

The project is a strategic development priority for land-locked Paraguay and the largest-ever private investment in infrastructure in the country. The roads stretch though a vital corridor that represents 70% of the economic output of Paraguay, according to Sacyr, stretching 149 kilometres (92 miles) from the capital of Asunción to the city of Caaguazú.

The project will double the lanes of the roads, from two to four, while constructing bypasses so that long-distance drivers can avoid urban areas. Once complete, Rutas del Este is expected to service 26,000 daily users. The $40 billion economy of Paraguay is heavily dependent on exports of agricultural goods such as soybeans and beef.

The financing also breaks new ground in that it includes a letter of credit facility provided by a multilateral lending agency to fully support advances to a project company using bond proceeds to finance working capital. The structure achieves the double purpose of eliminating construction risk from the perspective of bondholders, while reducing negative carry by eliminating the need for a separate working capital facility.

"The international financing of projects under new frameworks requires a lot of problem- solving, and the Routes 2 and 7 financing was no exception," said Clifford Chance banking and finance partner Gianluca Bacchiocchi.

This is the first project finance transaction for which IDB Invest has provided a letter of credit facility.

"By leveraging the status of IDB Invest as a multilateral lending agency with a robust credit rating, this innovative structure allocates risks efficiently to reduce financing costs and provide the protection required to attract institutional investors," said Clifford Chance banking and finance partner Guido Liniado.

Liniado and Bacchiocchi led the New York-based Clifford Chance team representing Goldman Sachs, while partner Fabricio Longhin led the Washington, D.C.-based team representing IDB Invest, and partner Jose Guardo handled project development and construction matters from Madrid.

The financing involves a complex multi-tranche structure that combines a securitisation of government receivables – certain construction milestone payments issued under the borrower's concession contract – with a letter of credit facility and a project financing.

The $457 million securitisation was structured by Goldman Sachs and implemented through a 144A/Reg S bond offering, with Goldman Sachs acting as global coordinator and joint bookrunner and Itau BBA also acting as joint bookrunner. Meanwhile, IDB Invest arranged a $200 million project financing and letter of credit facility that included the International Development Bank.

In addition to financing construction of the remaining works, the proceeds of the bond offering were used to repay the bridge financing for the project, known as Tramo 0, which Clifford Chance helped structure in 2017 as the first local financing in Paraguay to include project finance features.

Clifford Chance has extensive experience in Paraguay. Earlier this year, the team worked on the financing of the Corredor Bioceanico toll road, the first international project bond in Paraguay.

The White & Case team that advised on the transaction included partners Thomas Pate, John Vetterli, Charles Pesant, John Donovan and Steven Gee in New York; partner Carlos Viana in Miami; partner Juan Manuel de Remedios in Madrid; and associates in Mexico City.

Paraguayan firm BKM | Berkemeyer also advised Rutas del Este, with partners Hugo Berkemeyer and Martín Carlevaro having drafted a loan contract for the consortium.