Panama Canal chooses financial backers

November 27, 2008 5:47 AM

The first stage of a US$2.3 billion syndicated loan package to finance the expansion of the Panama Canal, a US$300 million loan from the International Finance Corporation, has been announced.

In negotiating the loan, the Panama Canal Authority (ACP) took legal advice from Shearman & Sterling LLP in the US and Galindo, Arias & López in Panama. Clifford Chance LLP acted for the IFC.

Shearman partner Cynthia Urda Kassis says the ACP approached the loan as a corporate rather than a project finance matter. She explains, "This was not a new project build from scratch on a greenfield site; it is an operating canal, which has been a successful business for more than 100 years, and ACP wanted the benefit of that to be reflected in the loan."

The 20-year financing was announced yesterday, to support the US$5.25 billion project, which will double the canal's capacity and allow it to handle large post-Panamax container ships that have become the new industry standard.

As well as the IFC, the financing bank syndicate will comprise the Inter-American Development Bank, the Japan Bank for International Cooperation, the Andean Development Corporation (CAF) and the European Investment Bank.

Urda Kassis reveals the banks were carefully selected from a long list of interested parties. "It was fascinating to look at all the different options, and try to match the lenders to the business and political interests of ACP," she says.

She adds that it was a challenge to design a long-term deal structure which accommodated the demands of her client, as well as those of five banks from widely differing business cultures.

Shearman & Sterling LLP handles all finance and contractual matters arising from the expansion project, while Mayer Brown LLP acts as procurement counsel. Both firms selected Galindo, Arias & López as local counsel, based on their experience and profile in the international market place.

Counsel to ACP

US

Shearman & Sterling LLP -Partners Cynthia Urda Kassis and Manuel Orillac and associate Erica Mouynes

Panama

Galindo, Arias & López -Partner Diego Herrera Dutari and of counsel Salomón Behar

Counsel to the banks

In-house counsel to IFC - Carloine Kahn
In-house counsel to IDB - Leif Weizman
In-house counsel to CAF - Americo Lorenzo
In-house counsel to EIB - Donald Fitzpatrick

US

Clifford Chance LLP -Partner Chris McIsaac

(Source: LatinLawyer)

14 November, 2008