Who is entitled to receive the RPA of Second Generation toll roads in liquidation proceedings?
After the liquidation phase in insolvency proceedings has been declared for Second Generation toll roads (R-2; R-3; R-4; R-5; M-12 to the airport; AP-36 Ocaña – La Roda; AP-7 Alicante bypass road; AP-7 Cartagena – Vera; and, soon, AP-41 Madrid – Toledo), the first consequence is the automatic takeover of the assets as a result of the ipso iure termination of the Concession Contract and the accrual of the Administrations’ economic responsibility (“RPA”, for its acronym in Spanish). The RPA must be calculated within 6 months (unless a different term is exceptionally regulated) as from the date of the termination of the Concession Contract, i.e. the date of the judicial decree declaring the start of the liquidation phase.
Who sets the amount of the RPA and what does it include?
The calculation of the RPA corresponds to the awarding Administration and is regulated in applicable legislation on public contracts (Royal Decree Leg. 2/2000, 16 June, “TRLCAP”, or Act 13/1995, 18 May, “LCAP”, depending on the year of award of the infrastructure).
In general terms, RPA is a compensation that the awarding Administration pays the concessionaire for the termination of the Concession Contract and taking over the asset. And it includes the amount of the investments made in expropriations, execution of construction works and the acquisition of assets required to operate the concession, always taking into account depreciation based on the concession term remaining.
In addition to the legal regulation, the tender documents with the general contractual and technical conditions and the Concession Contract may also regulate this compensation, although they always do so in similar terms to provisions under TRLCAP.
The amount of the RPA is reduced by any outstanding amounts for expropriations, which the Administration must pay in lieu of the concessionaire. This is the result of a retroactive and controversial amendment to the Law introduced in 2014.
The RPA’s peculiarity in these cases is its high amount as a result of the short depreciation period of the assets. It is precisely this (and how it impacts the State’s budget and the annual accounts of concessionaires, shareholders and creditors) that causes the huge differences in the estimates, ranging from 4,000 million euros as estimated by SEOPAN to 1,800 million euros according to the latest Government’ estimates.
Who receives the RPA?
After the termination of the Concession Contract and the take over of the asset, the right to perceive the RPA belongs to the concessionaire, now in the process of being liquidated.
The RPA to be paid by the Administration is part of the assets with which creditors are paid during the liquidation phase (Section 4, Chapter II, Title V of Act 22/2003, 9 July, “LECO”).
But what if the RPA has been pledged as a guarantee to a creditor?
Where the Second Generation toll roads are concerned, the RPA has been pledged as a guarantee for certain creditors financing the projects.
The claims that are guaranteed with a pledge are qualified as claims with special preference (provision 90 LECO). To this end, it is sufficient if the pledge has been granted in a document with authentic date, whereby it is customary for them to be granted in a public deed.
The Insolvency Practitioners must use the amount of the RPA that is pledged to pay, in the first place, the claims guaranteed with such pledge. If any amounts remain, they shall be used to pay the remaining creditors in accordance with the provisions of the LECO regulating creditors’ payment.
And what if the claims have been transferred?
The transfer of a claim usually encompasses that of its accessory rights, such as guarantees. Provided that the same formal requirements are met (i.e. that the pledge has been granted in a document with authentic date), the claim shall continue to be qualified as with special preference within the insolvency proceedings. Also, the transfer must be notified to the Insolvency Practitioners to ensure that they pay the transferee (e.g. the fund). Otherwise, the Insolvency Practitioners may pay the initial creditor (e.g. the bank).
90% of the financial debt relating to the Project Finance of these infrastructure assets has been transferred to funds that are highly specialised in this type of financial debt, i.e. distress debt funds or holdouts.
And if there isn’t enough to repay the claims?
In light of the huge discrepancies in the RPA’s estimates and the high volume of debt within the insolvency proceedings, the RPA will – in all probability – be the object of endless debate.
To contest the Administration decree fixing the RPA’s amount, the following have active legitimacy: (1) the concessionaire, currently in liquidation; (2) the Insolvency Practitioners, in defence of the insolvency proceedings’ interests; and (3) creditors that benefit from a pledge over the RPA (particularly if the RPA does not fully cover their claims). And, also, (4) any other creditors, provided they can show they have a legitimate interest, such as being negatively affected by the calculation of the RPA, which does not sufficiently compensate the concessionaire and does not cover repayment of its creditors.
Additionally, when the RPA does not cover repayment of all guaranteed claims, in some cases, the banks (or their transferees) hold an additional guarantee issued by the concessionaires’ shareholders.
The liquidation of the concessionaire and the hypothetical contestation of the RPA’s calculation will lead to a situation of high legal uncertainty, which might even preventively stall the new tender for the privatization of these assets, already under the State’s control through SEITTSA.