Project Finance Loans Miss Expectations

Structured finance bankers say that while they had expected infrastructure projects to require project finance loans this year, no new loans are close to being launched. The dearth of proposals has bankers worried the project finance market could be heading into a dry period in the next few months. “The last 2 months provide a very gloomy forecast as there is some pitching going on, but nothing else in the project finance space,” says one syndicated loans banker, who adds that even activity in the corporate loans space is spotty. Vale has appointed bookrunners for a $3bn syndicated loan, while America Movil is looking at proposals for a $4bn loan and Gerdau has put out an RFP for a $1bn loan. “A lot of corporates are well financed, so there are not many deals, and any deals that do come to the market will be able to price tightly as there is not much volume and banks are hungry to use their balance sheet,” says one head of syndicated loans. Market participants add that while some banks will look to lead deals, despite tight pricing, it will be very difficult for banks to participate at a retail level, particularly for European banks seeing higher costs as a result of the sovereign debt crisis. The last project finance loan, a $250m A/B loan from the IFC to fund the 168MW Cheves hydropower plant in Peru, came in December.