CAF Plots Colombia Road Fund

Corporacion Andina de Fomento (CAF) is planning a $1bn collateralized debt vehicle to invest in Colombian roads, an official at the lender says. The transaction will be a first for Latin America and a formula that will allow the development bank to leverage a small investment to fund a broad range of projects. CAF expects to spend the next three months finalizing the structure of the transaction, Victor Traverso, representative director for CAF in Colombia, tells LatinFinance. From there, the multilateral plans to look for other subordinated investors and mandate an asset manager to run the vehicle. CAF is planning on investing up to $75m. It hopes to minimize its contribution, however, by attracting mezzanine and other equity investors. CAF is targeting a $1bn size for the vehicle, comprising 70% senior paper rated double or triple-A, and 30% equity and mezzanine tranches. It is likely to invest in 15-20 projects, either through loans or bonds, says Traverso. “If it works right, we will be able to support a larger number of projects than through funding individual concession,” Traverso says. Colombian road construction concessions will make up the bulk of the vehicle’s investments, but it may buy other deals – potentially in other investment-grade countries ­­­- to build a diversified asset pool. The development bank is structuring the vehicle in-house, looking at examples of collateralized debt obligations used to finance infrastructure in the United States as a model. The formula could also be put into effect in other countries and industries, says Felipe Aristizabal, manager in Bancolombia’s investment banking division. “The multilaterals looking at getting involved want to make sure the structure is replicable. The vehicle will have some specific features, but on the whole it will be applicable elsewhere and in other industries,” Aristizabal says. “The success of the program depends on the two or three first concessions that they invest in. If they don’t do it