LatinFinance - November/December 2015 - 20

Source: America Aljazeera

Finance Corporation jointly bought 8.8% of FDN in April. The
development bank has been established to help catalyze private
sector financing into Colombia's infrastructure projects. As the
sole private investor in FDN, SMBC has been bringing products and
services to the bank that will facilitate infrastructure financing in the
country, the bank says.
Santarelli says that banks are considering playing parts in larger
infrastructure transactions, instead of taking on entire deals. "I have
seen, in Colombia for example, that the banks are willing and able
to participate on this. But they are thinking in a menu of options,"
he says. "The key concept here is that they won't go alone. These
projects are so big that you only take a part of that. It's mostly a joint
effort."
One of those options that has emerged recently is the single-asset
corporate structure, which allows a borrower to combine some
of the advantages of a corporate financing into a project deal. The
format borrows from corporate financing and project financing

ON DECK: Governments will have an important
role in steering concessions and policies to
attract infrastructure financing

templates, and offers borrowers fewer covenants and restrictions
than they would have for a traditional project financing, says HSBC's
Dumas. He points to the $500 million refinancing of the El Dorado
airport in Bogotá as an example. HSBC, SMBC, BNP Paribas and
Bancolombia wrapped the deal, which included peso and dollardenominated tranches, in May.
In Mexico, banks have stepped up their lending to infrastructure
projects in recent years, says the head of the country's development
bank, Abraham Zamora.
"A few years ago, Banobras financed more than 50% of the
infrastructure projects that were financed by banks," he tells
LatinFinance. "Today, that's less than 40%, it's around 37%. There
are more infrastructure projects, and they are being financed
more by banks. That means that the cake is has been getting bigger.
Banobras has been increasing its investment in infrastructure but
our slice of the cake has been getting smaller."
Center stage
While Zamora describes the developments as "great news" for
Mexico, he maintains that the country's banks and institutional
investors could still be allocating more to projects. In response

20 L ATINFINA NCE.COM - November/December 2015

to demands from commercial banks, Banobras is looking at new
guarantees that can further channel bank lending to infrastructure.
"At the moment we don't have explicit guarantees for the
construction stage. We're working with the World Bank and the
Inter-American Development Bank, which have construction
guarantees in other countries, to see how we could put these
together in a way that would facilitate greater commercial bank
participation in these early phases of project financing."
It is a move that is being echoed across the region. While
governments are looking to curb their financial input in these
infrastructure programs, observers say their roles in drawing in
private sector investment is paramount. From formulating reforms
and bankable concession contracts to providing guarantees or
mitigating risks, governments will take center stage in ensuring
private sector capital's availability and appetite for infrastructure
projects.
"All governments need international investors to come and
invest, to contribute to the development of the country," says
Armin García, executive vice-president of Colombian developer
Grodco. "They will do everything that they have to do, to maintain
international investment and bring more investors."
Grodco and Honduran contractor Prodecon sealed a $145 million
deal backing the Corredor Turístico project earlier this year. The
Honduran government's accessibility and its willingness to work
with lenders to modify the public private-partnership contract,
eventually enticed JPMorgan's commitment to transaction. The
deal marks the first time a major international commercial bank
has participated in a financing in Honduras since the country's
constitutional crisis in 2009.
Peru provides a similar example in the execution of the $280
million financing backing Grupo Romero's Terminal Internacional
del Sur project. The banks worked closely with the government to
re-negotiate the concession contract for the port expansion to make
it more palatable for the international banks that eventually took
tickets in the 13-year deal.
For Christian Laub, chairman of Peru's stock exchange and chief
executive of Credicorp Capital, stability and consistency from the
government are imperative for building a sustainable pipeline of
projects. "Infrastructure takes a long time, just from the moments
it's awarded to the financial closing from pre-construction to
construction to operation. It takes a long time, which is good and
bad," Laub says.
Enter, institutionals
Financial regulations, the sheer volume of upcoming project costs
and the drive to reduce public spending, are causing bankers,
borrowers and governments to find new options for infrastructure
financing. As a clear path to investors that are managing trillions of
dollars of assets, the debt capital markets are at the top of the list.

LUIS ALBERTO MORENO,
INTER-AMERICAN DEVELOPMENT BANK

"THE QUESTION IS HOW DO YOU
DE-RISK PROJECTS SUCH THAT YOU
GET MORE CROWDING IN OF THE
PRIVATE SECTOR?"
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