Puerto Rico’s P3 Authority in Closing of Landmark Concession Agreement for San Juan Bay Cruise Terminals

Cleary Gottlieb advised the Puerto Rico Public-Private Partnerships Authority (P3 Authority) in the closing of a landmark concession agreement for the cruise terminals in the San Juan Bay.

The firm advised the P3 Authority in the successful closing and handover of a 30-year concession for the operation, maintenance, repair, improvement, and replacement of the cruise terminals and related facilities in San Juan Bay. San Juan’s iconic cruise port is a gateway to one of the most visited Caribbean tourist destinations—it is located at the waterfront of the historic district of Old San Juan and receives more than one million passengers every year. Bringing this transaction to fruition represents a critical milestone in addressing the current infrastructure deficiencies and operational disadvantages of the San Juan Bay cruise terminals. The concession agreement, which was signed in August 2022 by the Puerto Rico Ports Authority (PRPA) and San Juan Cruise Port (SJCP), a subsidiary of Global Ports Holding Plc (Global Ports), closed on February 14, 2024.

The concession is expected to enhance San Juan’s position as a must-visit cruise port in the Caribbean following years of underinvestment in the cruise terminal infrastructure, the destruction brought by Hurricane Irma and Hurricane Maria in 2017, and the devastating impact of the COVID-19 pandemic on the cruise industry, and Puerto Rico more generally. The concession agreement with SJCP requires, among other things, SJCP to make capital investments for repairs, rehabilitation, and expansion works, which are expected to upgrade PRPA’s facilities to meet the needs of the modern cruise industry and become more resilient against future natural disasters. This project is also expected to drive economic growth on the island by spurring private infrastructure investment, serving as a catalyst for the creation new jobs, and boosting tourism spend on the island as a result of increased passenger traffic.

As part of the financing of the transaction, SJCP and a government entity raised approximately $187.1 million in municipal bonds. As a condition precedent to closing, PRPA settled its debt with the Government Development Bank Debt Recovery Authority in the amount of approximately $320 million, which allowed the release of existing mortgages on the cruise port terminals.

Since 2018, Cleary has represented the P3 Authority, which is tasked with implementing the government of Puerto Rico’s public policy on public-private partnerships (PPPs). PPPs facilitate the development of infrastructure and other projects by delegating the risks inherent to such development or service to the party that is best capable of assessing and managing such risks, improving services, creating new jobs, and developing Puerto Rico’s economy and competitiveness. Over the past decade, the government has had success in harnessing best industry practices, expertise, experience, and know-how for its infrastructure projects by entering into PPPs with private sector participants in other sectors. These projects include the long-term operation and maintenance agreements for Puerto Rico’s transmission and distribution system and legacy generation assets, concession of toll roads, and the long-term lease agreement for the Luis Munoz Marin International Airport, among others.

Global Ports is the world’s largest independent cruise port operator with an established and growing presence in the Mediterranean, the Americas, the Caribbean, and Asia-Pacific regions. Global Ports was established in 2004 as an international port operator. It holds a unique position in the cruise port landscape as the world’s leading cruise port brand, with an integrated network of cruise port serving cruise liners, ferries, yachts, and mega-yachts. Global Ports operates 27 cruise ports in 14 countries and continues to grow steadily.