Reuters published on July 12th, 2013, that the first EU project bond is to be issued under EU's Europe 2020 Project Bond Initiative.

The new bond deal announced on Thursday, will raise €1.434 billion to fund an underwater gas storage facility in Spain, replacing the bank loans that funded the construction of the project over the past two years. The project is called Project Castor.

Project Castor

BNP Paribas, Credit Agricole CIB, Bankia, CaixaBank, Natixis, Santander GBM and Societe Generale are lead managers in the project financing.

The project will pump gas into a disused oil field developed by Shell in the 1970s, some 20km from the coast of Valencia, and will allow Valencia to store the equivalent of three months gas supply.

European enhancement for the bonds comes in the form of a €200 million liquidity line from the European Investment Bank (EIB). Reuters said that this will boost the rating of the bonds by two notches - essential to make them into investment grade with S&P, thus expanding the universe of possible investors way beyond high yield or infrastructure specialists.

The liquidity line will not be drawn at first, but can be used to support cost overruns in the initial project phase, and latterly debt service shortfalls. If there is a debt service shortfall, the EIB's liquidity line will prepay some of the bond outstanding, deleveraging the structure.

EIB is also taking a separate EUR300m slice of senior debt.

The equity sponsors are ACS, a Spanish construction and engineering company, and Castor UGS, a partnership of Canadian oil and gas company Dundee Energy and private investors.

UPDATE: 

ACS  has closed the bond issuance in the Luxembourg Stock Exchange. Bonds with a value of €1,400 million have been issued. The maturity of the bonds is 21.5 years and the coupon 5,756%. The issue was subscribed mostly by foreign investors.The bonds will substitute a 7-year bank financing from nineteen banks.Source: EIB & InfraPPP Research