Willkie Advises on Groundbreaking Bond Financing of Health Campus in Turkey

December 7, 2016

Willkie advised project sponsor and borrower ELZ Sağlık Yatırım A.Ş. and its shareholders.

The signing of the documentation for the bond financing of the Elazig Integrated Health Campus in Turkey was announced on December 6, 2016.

The Elazıg Integrated Health Campus Project is one of several public-private partnership (PPP) projects launched by the Ministry of Health of the Republic of Turkey and was awarded to ELZ Sağlık Yatırım A.Ş. by the signature of a project agreement on August 26, 2014. Under the terms of this agreement, ELZ Sağlık Yatırım A.Ş. will undertake the detailed design, construction, equipment, financing of the health campus, while the provision of medical services will be under the responsibility of the Ministry of Health. The Project comprises an integrated health campus with a total capacity of 1,038 beds consisting of two hospitals and one clinic. These are the 888-bed main hospital, 150-bed high security forensic psychiatric hospital and 60-unit oral and dental clinic.

The €360 million capital expenditure of the project is financed through equity and quasi equity injections made by the shareholders of ELZ Sağlık Yatırım A.Ş., mainly the Turkish construction and services group Rönesans Holding and the international infrastructure investor Meridiam, and through a private placement of euro bonds issued by a Luxembourg issuer entity, ELZ Finance S.A., whose proceeds are on-lent to ELZ Sağlık Yatırım A.Ş. and is the first ever bond financing to be put in place for a greenfield infrastructure project in Turkey. The euro privately placed bonds have been assigned a Baa2 rating by Moody’s, an investment grade rating, reflecting support being provided by the Multilateral Investment Guarantee Agency (MIGA) through a political-risk insurance policy designed to cover currency risk, as well as risk of expropriation and breach of contract, and subordinated liquidity facilities during construction and operation coming from the European Bank for Reconstruction and Development (EBRD).

The bonds which were issued by ELZ Finance S.A. comprise three tranches as follows: (i) €83 million ($88 million) bonds maturing in 2034 (A1A bonds); (ii) €125 million bonds maturing in 2036 (A1B bonds); and (iii) €80 million unrated, senior secured, pari passu bonds maturing in 2036. The A1A and A1Bbonds were acquired by development and international finance institutions.

Advising ELZ Sağlık Yatırım A.Ş. and its shareholders was a team led by partner Amir Jahanguiri and including, in Paris, national partners Gabriel Flandin and Michaël Armandou, associates Cédric Gamambaye Dionmou, Roy Charles Bates and Idama Al-Saad; and in London, partner Graham Lane and associates Jennifer Tait and Mamoun Shafi.