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Goldman Will Pay $1.43B to Run Puerto Rico Toll Road

JUN 20, 2011 5:15pm ET
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A consortium led by Goldman, Sachs & Co. will pay a total $1.43 billion to maintain and operate Puerto Rico’s busiest toll road for 40 years.

Puerto Rico officials Monday announced the government will receive an up-front payment of $1.08 billion from Goldman Sachs Global Infrastructure Partners II LP and Abertis Infraestructuras, based in Spain. The commonwealth will retain ownership of Route 22, a toll road that runs for 52 miles through the north side of the island, and Route 5, a four-mile toll road that connects to Route 22 and runs south of San Juan.

At least 90% of the up-front payment will be used to pay down outstanding Puerto Rico Highways and Transportation Authority debt, said David Alvarez, executive director of the Puerto Rico Public-Private Partnership Authority. The highways authority has roughly $7 billion of outstanding bonds.

Under the long-term concession agreement, Goldman and Abertis during the next three years will spend $56 million for roadway safety improvements. The consortium must also invest another $300 million over 40 years for additional infrastructure needs on Route 22 and Route 5.

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A recent phenomenon is the emergence of bonds with shorter call protection as funding alternatives for municipalities. However, the shorter call protection also dampens the potential upside for investors, which in turn reduces the price they are willing to pay.

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