Linklaters advises on the first infrastructure bond financing in Russia (M11 toll road)

Linklaters team has advised on M11 motorway project (sections 7 and 8 of the Moscow-Saint Petersburg motorway, km 543 - km 684) - the first PPP project in Russia financed by combination of bank debt and infrastructure bonds secured by the concession rights.

The project includes financing, design, construction, operation and maintenance of a 138 km toll motorway originating at the Saint Petersburg ring road under a concession agreement. The concession company Two Capitals Highway LLC has been financed through two tranches of bonds and loan from VTB Bank. The Sponsors of the Project include VTB Group and Vinci Concessions. The total construction cost is about €1,1bn with the Russian Federation (represented by the state company Avtodor) financing 75% of construction costs through capital grant (RUB 57.6bn), and non-recourse financing comprising RUB 23,2bn (about €400m). This is the first time in Russia that the infrastructure bonds (i.e. bonds secured by a pledge of contractual rights under the concession agreement) have been placed in the market. Both tranches of bonds were acquired by several Russian non-state pension funds. Non-state pension funds are considered an important source of financing of infrastructure projects in Russia.

The Linklaters team led by Julia Voskoboinikova (counsel) and Andrei Murygin (partner) acted for the lenders (including VTB Bank and pension funds).

“We are very pleased to have an opportunity to be at the forefront of developing innovative solutions for PPP projects in Russia. This financing was closed in challenging market conditions and is likely to become a model for future infrastructure financings”, Julia Voskoboinikova comments.

“This is the first infrastructure bond in the Russian market using the new legal framework for the bonds following the 2014 securities legislation reform. Successful placement of the bonds in the market demonstrates great potential of this type of instrument for the development of real sector of Russian economy”, Andrei Murygin adds.