Patrick Harder Leads Team to Successfully Close $1.8B Florida I-595 Deal

Nossaman News Release

Los Angeles, CA (March 11, 2009)  A Nossaman team led by Patrick Harder, an infrastructure attorney based in Nossaman's Los Angeles office helped pull off a near miracle on March 3, shepherding the closing of a $1.8 billion deal between the Florida Department of Transportation and a consortium led by ACS Infrastructure Development. The deal will fund redevelopment of Florida Interstate 595 with express toll lanes. The successful deal closing is remarkable because the private equity markets have been essentially frozen for most of the last year, and this first infrastructure deal to reach financial close in almost a year signals to the credit markets that infrastructure is still considered a valuable asset. This public-private partnership will be the first to use availability payments in a concession in the United States and will allow Florida to complete a major transportation infrastructure project that would have been otherwise impossible given the dearth of public funds available.

Nossaman attorneys Simon Santiago & Brandon Davis were key members of the Nossaman team.

The financing for the project includes ACS's 12% equity position which is being supplemented by debt of $780 million issued by a club of 10 banks, and a Federal TIFIA loan of $655 million. The participating banks are led by Calyon, Dexia Crédit Local, Grupo Santander and Société Générale SG. Other participating banks are: Banco Popular Español; BBVA; Banco de Sabadell; La Caixa; Caixanova; Caja de Ahorros Y Monte de Piedad de Madrid; National Australia Bank; and WestLB

The project spans 10.5 miles of the I-595 corridor in Broward County, Florida, which includes Ft. Lauderdale, and is anticipated to support 34,000 jobs in the region. While the centerpiece of the project is the construction of three tolled and reversible, ground-level express lanes that ACS will build in the median of I-595, the consortium will also build direct connectors to Florida's Turnpike, auxiliary lanes and other operational improvements throughout the corridor. FDOT will control all tolling elements of the project and take all revenue risk. Tolls will vary depending on time of day and/or demand in order to maximize throughput.

The procurement process for the project started in October 2007 when FDOT received qualification statements from six teams. FDOT shortlisted four teams, received final proposals from two and awarded the 35-year concession agreement to ACS based on a best value analysis that took into account both the financial and technical aspects of the final proposals. The concession agreement tasks ACS with the responsibility to design, build, finance, operate and maintain the project for the 35-year term. ACS has scheduled completion of construction within five years, which is fifteen years sooner than would occur under a design-build or a design-bid-build approach.

Once construction is complete the concessionaire will be eligible to receive final acceptance payments (totaling $501 million over roughly 5 years) and availability payments (totaling $1.313 billion) for the remainder of the 35 year term. The availability payments are subject to adjustment based on ACS' performance during the relevant pay period. If ACS performs poorly, FDOT will decrease the amount it pays. The maximum amount of the total availability payments the concessionaire is entitled to receive each year if it meets all of its obligations under the concession agreement is $65.9 million in 2008 dollars. This amount, which is based on the maximum annual availability payment bid by ACS in its proposal, will escalate each year to reflect increases in CPI. ACS' financial model projects an 11.54% return on its equity investment.

A number of other states, including California, may soon see deals similar to the I-595 deal. The Los Angeles County Metropolitan Transportation Agency, for example, is starting up its own public-private partnership (PPP) program and the state is developing and passing legislation to allow more PPP-type deals across the state.

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