Crescent Capital (and the Clean Energy Fund) looked to fund two hydroelectric power plant assets acquired in the same year using one streamlined financing structure.
It was unusual for there to be a mezzanine tranche in a Turkish project finance deal, and the fact that this mezzanine tranche was structured as a Murabaha commodity purchase tranche, makes it particularly unique.
This added to the complexity of the negotiations, in particular the inter-creditor arrangements under which the mezzanine loan would be permitted to be paid out prior to the expiry of the senior financing under certain conditions.
The deal contained both a conventional project and acquisition finance senior tranche arranged by Garanti Bankasi, and a commodity Murabaha tranche arranged by QInvest. Having both structures on a project and acquisition financing in Turkey is fairly novel.
The Murabaha commodity purchase mezzanine tranche complemented the senior facility, evidencing further innovation in structuring by the Crescent Capital team.
Alongside the rarity of incorporating a mezzanine facility into Turkish project finance, Crescent Capital was able to secure an unusually long 15-year tenor on the deal.
The long tenor of the project meant that the terms of the financing deal were more closely scrutinised to ensure compliance for the duration of the project.
However, as the facilities were already constructed, the lenders did not need to consider construction risk and therefore focused their attention on the strength of the operation cycle.
In addition, although the borrower is owned by Crescent Capital, this financing was non-recourse and therefore the borrower (and the project) had to stand on its own. The fact that no sponsor guarantees were required, meaning the senior project financing is truly ‘non-recourse’, was again unusual for the Turkish market.
The transaction was distributed through both local Turkish banks through Garanti Bankasi for the senior financing, and Gulf-based funds through QInvest’s structuring of the Murabaha mezzanine financing.