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Clifford Chance

Clifford Chance

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Clifford Chance advises on the projected public sector-private sector partnership for construction of the Marseille L2 Ring Road

9 October 2013

Clifford Chance advises on the projected public sector-private sector partnership for construction of the Marseille L2 Ring Road

On 7 October 2013, the State (Ministry for Ecology, Sustainable Development and Energy) and the Marseille L2 Ring Road Company (Société de la Rocade L2 de Marseille), the project concern set up by the group awarded the contract that was made up of entities from the Bouygues Construction Group (namely Bouygues Travaux Publics – client's representative, Bouygues Travaux Publics Régions FranceDTP Terrassement and Bouygues Énergies & Services), from Colas Midi-Méditerranée, from Spie Batignolles, from Egis Projects, from Egis Investment Partners, from Meridiam Infrastructure and from CDC Infrastructure signed the partnership agreement for the new ring road around Marseille (L2 Ring Road or A507). This 30-year agreement covers the design, building, technical management, maintenance, renovation and financing of the A507 Motorway (L2 Ring Road) and represents a total investment of close on 620 million Euros. This new toll-free expressway will provide a ten-kilometre bypass avoiding Marseille between the A7 (northbound motorway leading to Aix-en-Provence) and A50 motorways (eastbound motorway leading to Aubagne and Toulon) and ease traffic flow in the centre of the city. The L2 will thus facilitate numerous passenger transport projects.

The first of its kind in France, the financing of this project will be undertaken right from the start of the building phase via the issue of Project Bonds, with a bond tranche issued directly by the project company (of around 78 million Euros) and another issued by a French Securitization Mutual Fund (FCT) (with Paris Titrisation as management company) for the refinancing requirements of a loan secured by  Dailly transfer by way of security accepted by the State (of around 84 million Euros).

This financing has necessitated recourse to complex and innovative contractual mechanisms.

The Project Bonds have been the subject of private investment with several funds managed Allianz, the key operator in this operation.

Both bond issues were given a preliminary rating of Baa3 by Moody's.

Besides these Project Bonds, an own funds bridging loan and VAT loan were set up by Crédit Agricole Corporate and Investment Bank and Société Générale to, respectively, pre-finance VAT relating to project costs and own funds to be paid in by the project company's shareholders on commissioning of the work at the latest. The cohabitation of these purely banking tranches with the bond tranches necessitated the setting up of complex inter-creditor agreements.

The financing of the L2 project was also undertaken via public-sector borrowings.

Clifford Chance advised the group and was in charge of the Securitization Mutual Fund documentation, with a team made up, for the public law aspects, of David Préat (partner), Marion Roquette-Pfister (counsel) and Gauthier Martin (senior lawyer) and, for the financing aspects, Project Bonds and securitization, a team lead by Daniel Zerbib (partner), Benjamin de Blegiers (counsel) and Vincent Hatton (counsel) with Vincent Danton (senior lawyer), Roy Charles Bates, Alice Latour and Audrey Manera.