Foreign banks to fund Tel Aviv Light Rail
Project's contractor MTS presents Finance Ministry with letters from nine foreign banks wishing to fund €930 million project at high interest rates. Ministry says long road ahead before financial closure
Tel Aviv Light Rail contractor MTS presented the Finance Ministry with a list of foreign banks willing to grant funds for the construction of the project in the amount of €930 million ($1.2 billion) at an average to high LIBOR interest rate plus 3%.
On Thursday MTS representatives met with Finance Ministry Accountant General Shuki Oren and presented him with letters from nine foreign banks that have expressed interest in funding the Tel Aviv Light Rail.
According to a source involved in the project, €511 million ($656.6 million), about 55% of the funding, covered by the State's foreign exchange risk insurance, will carry a LIBOR interest rate of plus 2% - 2.5%.
Interest for the remaining €419 million ($538.4 million) that are not insured by the State will be set at plus 3% - 3.5%. The new interest rate is about 1.5% higher than the rate discussed prior to the global economic crisis, which put the whole project at risk.
Israeli banks share funding too
The Royal Bank of Scotland, which was supposed to lead the funding for the light rail, almost collapsed and was nationalized following the crisis and retracted from funding the project.
However, MTS CEO Yohanan Or presented the accountant general with a letter from RBS stating it is still interested in taking part in the funding of the light rail.
Other banks offering to share in the funding include Germany's Bavarian State Bank, KFW bank, and Portugal's Banco Espirito Santo.
Thursday was the deadline for MTS to present the State with the project's financial closure, after two delays in May and September of 2008.
Once the financial closure is approved, MTS can start the construction of the project, which is expected to take five years. The group will then operate the light rail for a period of 27 years.
In addition to the foreign funding, MTS will receive €300 million ($385.5 million) from Israeli banks, headed by Bank Leumi.
The rest of the investment will come from the companies that make up MTS, including Lev Leviev's Africa Israel, Siemens of Germany, the Egged Bus Cooperative, Chinese infrastructure company CCECC, and Portuguese infrastructure firm Soares da Costa.
Finance Ministry sources said the agreements with the foreign banks would be examined, but that financial closure was still a long way away.
