Tribasa Toll Road Project

Topics: Risk, Money, Corporate finance Pages: 9 (2844 words) Published: March 2, 2014

Tribasa Toll Road Project
Case Study-4

Submitted By:
Amardeep (P301412CMG331)
Bhupendra Malviya (P301412CMG352)
Pratik S. Soni (P301412CMG404)
Rajesh Kumar (P301412CMG413)
Shobhit Gupta (P301412CMG447)

INDEX
1. Please prepare a flow of funds diagram for this transaction to trace how toll road revenue received by the Trust is used to pay taxes and operating expenses and to make interest and principal payments as required by the terms of the offering. …………………………………..3

2. What risks to investors are inherent in this financing? ………………………..5

3. How was the transaction structure designed to minimize investor exposure to project risk? ……………………………….....7

4. The Mexican government’s decision to float the peso was unanticipated at the time of the offering. How would you expect the devaluation to affect the performance of the Notes? ………………………………….9

5. What lessons do you take out of this financing? How could this technique be used to arrange financing for other highway and facility concession projects in the developing world? ………………………………10

The Tribasa Toll Road- Case Study
Overview:
This case demonstrates how the international capital markets were used to obtain financing for the expansion of limited access highways in Mexico. Structured as a Rule 144A transaction, the offering securitized the future Mexican Peso-denominated toll revenues of two toll roads to support US dollar denominated securities. From the sponsor's point of view, the deal provided a means to remove indebtedness from its balance sheet while retaining control of the assets. Investors purchased high-yield securities supported by two toll roads with an operating history (and no construction risk). The drastic devaluation of the peso in December 1994 more than doubled the liability in US dollars and offers an opportunity to consider the ability of the Trust to continue to support the notes.

1. Please prepare a flow of funds diagram for this transaction to trace how toll road revenue received by the Trust is used to pay taxes and operating expenses and to make interest and principal payments as required by the terms of the offering. Toll revenues collected by operator were to be segregated into different accounts to ensure that taxes are paid and operating, maintenance and administrative expenses are met before Note-holders received payments of principal and interest. To ensure that toll revenues flow appropriately to meet operating expenses and administrative expenses and pay debt services, the Trustee established and maintained three accounts to hold the Trust’s assets:

General Account: A general purpose account to hold revenues until needed for operating expenses or debt service payments. SCT Account: A segregated account to hold funds for payments that are required to be made to the Transport Ministry. Major Maintenance Account: A Segregated account to ensure that funds are available to make necessary repairs or major maintenance. Debt Service Reserve Fund Account: This account was established with a US bank as fiscal agent. The debt service reserve holds fund in US dollars, which are available to pay debt service if funds are not available in the General Account to make timely payments of interest or principal. Each week, the operator would transfer toll revenues (net of the VAT) to the General Account. Cash received by the Trust was used first to pay certain royalties to the Mexican Transportation Ministry, then taxes and operating expenses related to the roads and finally to make principal and interest payments on the notes. The Trustee withdrew funds in the following order: Each month

Funds were deposited into SCT account for payment to the Transportation Ministry. Funds were...
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