Coface and CAF lend to Panama metro

Citi is joint global co-coordinator for project that will help to get cars off the street

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Coface and CAF plan to lend US$750m in total as part of the overall US$1.9bn needed to build Line 1 of Panama City's metro system. Coface, the French export credit agency, will lend US$350m in support of supplies of trains from Alstom, a French multinational involved in transportation. CAF, the Latin American multilateral, plans to lend US$400m.

The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm of the World Bank Group, has issued a US$320m guarantee to cover a US$250m loan arranged by Citi Transaction Services and Citigroup Global Markets. The balance will come from the Panamanian government.

The MIGA facility involves financing the construction and some of the rolling stock. Also, Citi arranged a Coface facility for most of the investment in the rolling stock.

Citi is the joint global co-coordinator along with the Bank of Tokyo-Mitsubishi UFJ Ltd on the MIGA-guaranteed financing, with Mizuho Corporate Bank Ltd serving as lead arranger. This project is MIGA's first coverage of non-honoring of sovereign financial obligations in Latin America and the Caribbean. The tenors will be 12 years, but CAF's will be a little longer.

The metro line, which will be 14km (9 miles) long, will involve underground, train level and elevated portions through the centre of Panama City. Construction started last year and it is expected to be completed by 2014.

The funding will be distributed starting in February, most likely over a six-month period. Odebrecht, a major Brazilian firm, and FCC, a large Spanish construction company, are the developers.

"The idea is to get cars off the street," Valentino Gallo, Citi's global head of export and agency, told PFI in a telephone interview from New York. Like much of metropolitan Latin America, Panama City is clogged with motor vehicles. The hope is to lure drivers and passengers out of cars and into the metro system.

"Citi got involved because we have been present in the country for many years and have been helping the government with its funding needs. The funding sources are quite critical at this moment," Gallo said. He added that Panama was an investment grade country, making it more attractive for investment.

The Panama Canal, one of the area's economic drivers, is undergoing an expansion that is also scheduled to be completed in 2014. This could expand investment and traffic, making a metro system even more important.

"Panama is becoming a hub for Central America in general, and an efficient metropolitan mobility system is going to support growth," Gallo said.

Written by Alan Gersten

Originally printed on August 22, 2012 in the Project Finance International Magazine, Issue 487

Part of the IFR Group

http://www.pfie.com/caf-to-lend-us$600m-for-line-2/21031293.article

About Citi

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