best banks in project finance, The

Global Finance, Oct 1999 by Hanes, Kathryn, Brandman, James

Bankers in Asia and Latin America are unlikely to remember the year as a kind one for project finance. The financial woes of Asia, followed by crises in both Russia and Brazil, meant bankers were pushing emerging market deals uphill for most of the past year. Lenders were reluctant to sign up for the long haul, managers were forced to cancel or delay deals, and project finance teams found themselves quickly downsized.

But not all the news has been glum. Bankers in the United States and Britain can't complain. The United States enjoyed an upsurge in powergenerated projects on the back of privatization and consolidation in the industry. In Britain the Private Finance Initiative continued apace, while much enthusiasm was mustered in the power sector. Western Europe, meanwhile, set its sights on refinancing, and Central Europe, which escaped the dilemmas in the East, pushed through some impressive deals. In the Middle East there were signs of new life as the power and telecom sectors sought project financing. And at long last the world got a glimpse of India's vast, untapped potential, with the largest international project loan ever pulled off by an Indian borrower.

Global Finance's awards for Best Banks in Project Finance are based only partially on the number and size of deals in which a bank has been involved. Project finance deals are won or lost on an investment bank's ability to ensure the lowest cost of funding and its expertise in staging repayments to maximize customer cash flow.

Global Finance has tried to identify those banks that best help their customers maintain cash flow, drive down the cost of borrowing, offer taxefficient financing, and tailor deals to meet the customers' particular funding requirements. We have looked at the banks' abilities to administer, monitor, and drive a project forward from its inception-and the element that sorts out the wheat from the chaff: the banks' ability to mitigate risk.

Citigroup has the Americas under wrap. Deutsche Bank reigns supreme in Europe. Asia, the Middle East, and Africa is the most contested ground with Citigroup, Credit Suisse First Boston, and Barclays dividing up the spoils. - Kathryn Hanes

The following section was compiled by James Brandman.

NORTH AMERICA

Citigroup

This award was a two-horse race between project finance giants Citigroup and Bank of America. Both benefited from synergies with Salomon Smith Barney (SSB) and NationsBank, respectively, but Citigroup made those synergies work best in the North American market.

Citigroup combined SSB's expertise in toll road financing, bond issues, and distribution with Citibank's established strength in loan underwriting. Citibank was lead manager and syndication agent, with SSB as financial adviser, on the C$2.7 billion ($ 1.8 million) Highway 407 project in Canada, the privatization of the world's first fully electronic toll road.

Citigroup quickly exploited deregulation in the US power market, the hotbed of North American project finance during the last 12 months. It arranged, with three other international banks, $1.8 billion in-term, revolving, and bridge loans for Edison Mission Energy's acquisition of 1,884 megawatts of coal-fired merchant-generating capacity in Homer City, Pennsylvania. Citigroup was also lead manager and syndication agent on Enron's $727.5 million Rawhide deal, an innovative transaction involving the financing of a global pool of gas and power project assets.

In February, SSB was the lead manager on a $107 million bond issue for Cynergy. The deal was the first project finance bond secured on the revenues of an independent power producer, rather than its physical assets.

WESTERN EUROPE

Deutsche Bank

Deutsche Bank's broad expertise in project advice and underwriting, as well as the geographical spread of its projects, pushed its team in Western Europe ahead of stiff competition from Warburg Dillon Read and Royal Bank of Scotland.

It arranged $475 million in financing for GCHQ, the British government's communications headquarters, and a $1.13 billion facility with Barclays, HSBC, and J.P. Morgan for Railtrack to finance the first part of the ChannelTunnel Rail Link.The deal it arranged for the 360-MW AES Fifoots Point power project was the first of its kind for a coalfired merchant plant. More significant, it advised the Consort consortium on the $371.6 million Edinburgh Royal Infirmary and Medical School private finance initiative (PFI) project, leading negotiations and financial documentation with ABN-AMRO. It also arranged the project debt with five other banks.

Deutsche advised Boeing and GKN on the $420 million Apache Helicopter PFI deal and was one of four banks to arrange a $2 billion facility for ICO Global Communications.This year alone it has secured 11 advisory mandates on projects worth a total of $8.6 billion-a 23% share of the market.

Deutsche announced in April an agreement with Banco di Napoli to pursue public/private partnershipsbased on the British PFI model-in Italy, which needs at least $67.8 billion in infrastructure investment.