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Linklaters Advises on Russian Motorway PPP


Linklaters has advised the lenders, including VTB Bank and pension funds, on Russia’s M11 motorway project (sections 7 and 8 of the Moscow-Saint Petersburg motorway, stretching from km 543 to km 684) — the first PPP project in Russia financed with a combination of bank debt and infrastructure bonds secured by the concession rights.

The project includes financing, design, construction, operation, and maintenance of a 138 km toll motorway originating at the Saint Petersburg ring road under a concession agreement. The concession company Two Capitals Highway LLC has been financed through two tranches of bonds and loan from VTB Bank. The Sponsors of the Project include VTB Group and Vinci Concessions. The total construction cost is about EUR 1.1 billion with the Russian Federation (represented by the state company Avtodor) financing 75% of construction costs through capital grant (RUB 57.6 billion), and non-recourse financing comprising RUB 23.2 billion (about EUR 400 million). This is the first time in Russia that infrastructure bonds (i.e. bonds secured by a pledge of contractual rights under the concession agreement) have been placed in the market. Both tranches of bonds were acquired by Russian non-state pension funds, which regularly finance infrastructure projects in Russia.

The Linklaters team was led by Partner Andrei Murygin and Counsel Julia Voskoboinikova (who in 2014 advised on Russia’s Kutuzovsky Northern bypass project, the first privately-financed PPP project in the country’s history). Speaking of the current deal, Voksoboinikova said that: “We are very pleased to have an opportunity to be at the forefront of developing innovative solutions for PPP projects in Russia. This financing was closed in challenging market conditions and is likely to become a model for future infrastructure financings.”

Murygin pointed to the new legal framework for bonds which made the deal possible. “This is the first infrastructure bond in the Russian market using the new legal framework for the bonds following the 2014 securities legislation reform,” he said. "Successful placement of the bonds in the market demonstrates great potential of this type of instrument for the development of real sector of Russian economy.”