BRADENTON, Fla. — Skanska on Friday said it reached financial close with the Florida Department of Transportation for the financing, design, construction, operation and maintenance of the I-4 Ultimate Project.
Sweden-based Skanska and John Laing Investments Ltd. of London are the main equity partners in I-4 Mobility, the consortium chosen by the FDOT to build the $2.3 billion project, a major makeover of Interstate 4 in the Orlando area.
The 40-year, public-private partnership concession contract also reached commercial closing on Friday.
"As Florida's largest transportation project ever, and the largest greenfield public-private partnership in the U.S. market to date, the I-4 Ultimate is a demonstration of how P3s can solve critical infrastructure needs," Skanska president Johan Karlström said in a prepared statement.
In addition to equity, the work is being financed with up to $489 million of debt through a syndicate of international banks and $950 million in low-interest federal loans from the Transportation Infrastructure Finance and Innovation Act program, according to I-4 Mobility's plan of finance.
The exact day the loans closed was not immediately available.
Skanska and Laing said they already had negotiated an interest rate of 4.04% with six banks.
On Friday, 35-year TIFIA loans earned interest rates of 3.17%
In the financial proposal submitted to FDOT for the project, I-4 Mobility said the bank loan rate was "significantly lower" in cost of funds than private activity bond financing. A federal PAB allocation had been secured for the project.
Standard & Poor's and Moody's Investors Service assigned BBB and Baa1 ratings, respectively, to the senior secured debt.
"The strength of ratings was highly beneficial to the successful financing of the I-4 Ultimate," said Skanska spokeswoman Mary Humphreys. "The finance plan we submitted earlier this year was largely in concert with what was achieved."
The financial underpinnings of I-4 Mobility's plan are solid, and the companies involved in the P3 concession represent a "very, very qualified partnership," according to a Florida-based P3 expert who reviewed the plan at the request of The Bond Buyer, but asked not to be identified.
"I was rather impressed," the expert said following the review.
He was not surprised that international banks stepped up to offer an affordable loan rate, or get involved in an U.S. public-private partnership concession, he said.
"The international banks are far more familiar with P3 projects, the stability of them and the creditworthiness," he said, adding that U.S. banks may soon get interested in this kind of financing.
Financing Florida's largest P3 is about the cost of funds.
"Rather than use tax-exempt debt they are going to this bank facility," the P3 expert said. "The bank rates are very good, and TIFIA loans are very attractive and often cost less than bonds."
The Florida Department of Transportation declined to make a statement on financial close of the project. The agency is expected to make a public announcement on Tuesday.
Funding for construction will come from local, state, and federal sources, and will be made to the contractor in 17 "periodic payments" totaling $1.035 billion over the construction period, in addition to two final acceptance payments of $300 million and $388 million.
I-4 Mobility will receive periodic payments from FDOT based on a percentage of work completed over time because the contractors may work on various segments of I-4 intermittently, which would make it difficult to carve out distinct pieces on which to base payments based on milestones such as completion of a certain segment.
After construction, and in the remaining 34 years of the concession, I-4 Mobility will receive annual operating and maintenance availability payments totaling $80.7 million, which are subject to meeting state performance standards.
The state will collect toll revenues on managed lanes that are incorporated in the project, and those funds going toward project availability payments.
Construction on the I-4 project will begin in the first quarter of next year, and is to be completed by 2021.
The contractors are Skanska, Granite Construction Co., and the Lane Construction Corp.
Infrastructure Corporation of America will perform operations and maintenance after the project is completed.