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FCC finance deal in the UK, increases the business’ scope for expansion in the environment area

04/07/2018

FCC finance deal in the UK, increases the business’ scope for expansion in the environment area

  • FCC closed a senior secured long-term Investment Grade-rated transaction, in its environment branch in the United Kingdom.
  • This was accomplished by, from one side, the issue of £207.3m senior long term investment grade debt, backed by two of its energy from waste (EfW) assets in the United Kingdom: the Allington plant in Kent and Eastcroft facility in Nottingham. Most of the proceeds were used to amortise short-term debt at the holding company (Azincourt and Group FCC Environment (UK) Ltd.).
FCC finance deal in the UK, increases the business’ scope for expansion in the environment area

The total financing on the EfW assets includes £145 million in senior secured private placement notes (fixed and floating) – with maturity of 20 years – and £62.3 million pari passu unrated senior secured bank term loan that is also payable in 20 years. The Project obtained investment grade rating from a leading rating agency and the rating outlook is stable. Actual costs were set at UK Gilt + 250 bps.

The transaction achieved the first investment grade rating assigned to a portfolio of EfW plants in the U.K., therefore making it a pioneering deal from a rating perspective in the EfW sector.   

The two EfW plants supporting the financing give a general portfolio diversification effect thanks to (i) different combustion technologies, (ii) distinct regional market dynamics, and (iii) a total of 5 incineration lines. The plants benefit from historically strong ties with credit worthy local authorities to which they provide waste disposal and other infrastructure services under long-term contracts.

Ongoing high landfill taxes and export costs, combined with barriers to entry and projected treatment capacity gaps in the relevant catchment areas, increase the prospects of a successful renewal of the EfW waste supply contracts in 2030. By that stage, FCC will also have significantly de-levered from scheduled amortization payments and will be more capable of withstanding adverse market conditions, should CACIB acted as sole Financial and Rating Advisor to FCC. Inter alia, the rating agency noted the borrower’s strong credit underlined by the revenue and cash flow stability from long-term, fixed price contracts with creditworthy counterparties at two operating waste-to-energy facilities in the U.K.

About FCC UK

FCC is a leading global environmental services, water and construction business, and has nearly 30 years of experience in the UK of contracting with local authorities and businesses for the management, disposal and treatment of millions of tonnes of household, and commercial and industrial waste with track record in developing, constructing and operating assets and managing various stakeholder relationships (notably UK councils).