When discussing Latin America these days, a significant amount of time is spent on growth, or the dismal lack thereof. After enjoying tremendous rates of the stuff over the past few decades, the region’s economies are undisputedly slowing down. China’s retraction in export demands, falling commodities prices, eventual US rate hikes and the long shadows of corruption scandals are among the external challenges faced by all borrowers, and their bankers, in Latin America.
The project finance market is not immune to these elements. Latin American project finance lending stood at $7.1 billion in the first half of 2015, a roughly 50% decline from the same period last year, according to Dealogic. However, sponsors and lenders weathered the macroeconomic externalities, and more, to execute some truly creative transactions backing projects that will put Latin America in good stead to help turn the economic tide.
Innovation surfaced in several debt capital markets deals, such as a $273.3 million variable funding note backing the Red Dorsal fiber optic network in Peru and the first ever dollar-denominated corporate bond to back infrastructure in Uruguay for Corporación America’s ACI Airport Sudamerica. Other DCM transactions staked out new frontiers for sponsors, such as Metro de Santiago’s $500 million 2024 bond backing subway lines 3 and 6. The bond, which was coupled with an $800 million bank loan, marked the first issuance for the borrower in its 45-year history and gave it international exposure.
Engineering deals to tap into new sources of capital was also a major theme. International investors purchased Peruvian sol-denominated notes backing the Rutas de Lima highway improvement and expansion project and an institutional investor has taken a portion of an equity-like junior debt tranche supporting the Marcona/Tres Hermanas wind project, the largest wind facility in Peru. Looking ahead, these interests are a bright spot in the financial landscape of a region that is betting on billions of dollars of ports, roads, power and logistics to return it to growth.
The winning deals recognized in this year’s Project & Infrastructure Finance Awards were selected through a rigorous process that involved extensive market consultation, examination of financial data and editorial evaluation. LatinFinance considered deals closed between June 1, 2104, and May 31, 2015. For full details on the selection process, visit latinfinance.com/infrastructureawards. LF