Jan 16, 2013

The board of directors of the BNDES has approved the support conditions for the concession of the BR 116/MG and BR 040 highways, in the states of Minas Gerais and Goiás as well as in the Federal District. These auctions will take place on January 30, 2013.

The concessions are part of the 3rd stage – Phase 1 of the federal government’s Logistics Investment Program – and aim at implementing the project to recover, preserve, maintain, operate, improve, and increase the highways’ capacity. Both concessions will have a 25-year term, as of the date the contract was signed.

The BNDES may support the winner of the tender either by financing or by variable income. In this case, BNDESPAR, a BNDES holding company, may subscribe shares or other securities convertible or exchangeable into shares, at BNDESPAR’s 
sole discretion. The financial conditions defined by the BNDES are disclosed prior to the tender date so as to inform the interested parties of the BNDES’ rates, terms and requirements beforehand.

Loan Conditions
• Rate: TJLP plus 1.5% per year
• Term: up to 240 months, with a 36-month grace period 
• Share: up to 80% of the Eligible Items
• Structure of guarantees: Funding for corporate structure and/or on project-finance structure. In the latter, a pledge of shares will be required; granting the right to take over the beneficiary; fiduciary assignment of credit rights and receivables, with a centralized bank account; a reserve account (three times the monthly debt payment).
In the pre-operational phase, the following guarantees will also be required: corporate guarantees from controlling entities, bank guarantees and warrant insurance in favor of the BNDES.
In the operational phase, operational and financial covenants (agreements made in debts contracts) are required.
• Payment: The calculation of the BNDES’ credit will be made using the Constant Amortization System (SAC). The amortization curve can be based on the Price System, in case the beneficiary issues any debentures.
• Concessionaire capital structure: a 20% minimum of shareholders’ equity.

In addition to the economic-financial qualification restrictions imposed in the concession call-to-bid, the following parameters will be required, which were based on the consolidated annual balance sheet of each company and the business groups of their shareholders:
• For the group of consortium shareholders, for every R$ 1 million financed, the sum of the net equity and the total assets of business groups and/or the concessionaire shareholding companies must meet the following requirements: Net equity greater than or equal to R$ 1.3 million, and total assets greater than or equal to R$ 2.8 million;
• For each shareholder, the following requirement must be met: for every 1.0% of the project share, R$ 1 million in financing, the respective shareholder or his/her business group must present, at least, a net equity greater than or equal to  R$ 13,000 and  total assets greater than or equal to R$ 28,000.

Bridge loan – Conditions to obtain the bridge loan are the following:
• Amount: up to 30% of long-term financing;
• Rate: the same spread as the main financing (TJLP plus 1.5%);
• Term: up to nine months;
• Guarantees: bank guarantee from a financial institution accepted by the BNDES or shareholders guarantee, for business groups with a credit margin available in the BNDES and which are entitled to a real guarantee exemption.

Conditions to participate in BNDESPAR
• Majority private control of the beneficiary
• Minimum funding of R$ 100 million;
• Limit share: 20% of the capital stock of the beneficiary or equal to 30% of their own equity related to the concession, whichever is less;
• Governance conditions: adopting best practices, aimed at achieving the required standards to adhere to Bovespa’s New Market; and entering into a shareholders’ agreement which will establish, among other matters, minority protection rights for BNDESPAR, such as, the right to veto matters considered relevant;
• Liquidity conditions: establish tag along rights of the total amount owned by BNDESPAR; schedule the moment to go public on the BM&FBovespa New Market of the beneficiary or other company in the same business group which owns the assets related to the highway concession. If going public does not occur in the period established, BNDESPAR will have the right to its put option for their securities against the controlling entities or relevant shareholder(s);
• Precedent Obligation: In the case of company stakes (shares) in private companies, legal, accounting and financial proceedings are needed prior to the BNDESPAR’s share in the beneficiary capital.

Detailed information on the BNDES’ and BNDESPAR’s support conditions can be found here.