The Latin American syndicated loan market started 2016 with few deals in a persistently competitive and highly liquid environment for lenders. However, further deterioration in the commodity sectors and discouraging growth prospects across the region have sparked more caution among banks. Although loan spreads have yet to widen, following the repricing trend seen in the debt capital markets, financiers are expecting an upward shift in deal terms.
“A pricing that we gave before to a bullet-revolver loan, we are now offering for an amortizing facility, maybe with a shorter tenor,” a banker says.
Structured finance, acquisition loans, refinancings and bilateral deals have set the tone for the start of the year. Clubs have been more frequent than syndications, though some syndicated deals have moved forward.
US private equity firm KKR mandated Crédit Agricole for a multi-tranche, senior secured, $1.35 billion loan to buy assets from Pemex. Joint bookrunners Banorte, BBVA, Citi, JPMorgan and Santander are syndicating Axtel’s $750 million loan. The Mexican telco, now a subsidiary of Grupo Alfa, will use proceeds to pay bonds maturing in 2017, 2019 and 2020. Also in Mexico, toll road concessionaire Copexa signed a long-term loan for 4.49 billion Mexican pesos to refinance a credit facility signed in 2008.
Peruvian builder Graña y Montero, and generators Fenix Power and IC Power sought deals to fund acquisitions. Banks are assessing GyM’s five-year $200 million syndicated loan, which the company will use to pay for a 20% stake in natural gas pipeline Gasoducto Sur Peruano. IC Power’s subsidiary Inkia is in the market for a $120 million syndicated bridge loan to pay for three energy companies that form Guatemala’s Energuate. Fenix Power´s $365.7 million loan will cover Chilean parent company Colbún’s acquisition of Fenix.
Sovereigns also tapped loans. Argentina’s central bank took a one-year $5 billion facility from seven lenders in a deal that heralds the markets’ optimism over President Mauricio Macri’s administration. Ecuador agreed to a $970 million loan with the Industrial and Commercial Bank of China.
Project financing deal flow is also weak. Pricing is set to increase as lenders take a more cautious approach. Well-structured deals from investment grade borrowers are finding favor among financiers, rather than riskier credits.
“If given the choice, I would rather go to a secured deal with a familiar client than a riskier project in a new legal environment,” a banker says, referring to the expected pipeline of deals that should come out of Mexico after regulatory changes in the energy sector.
For infrastructure sponsors, project financing remains the go-to choice, as capital markets remain more expensive.
Colombian energy utility ISA, through its Chilean subsidiary Interchile, completed a long-term $738 million financing with a club of six lenders for a transmission line portfolio. Several 4G highways have completed financing. A consortium comprising Pacifico 3 signed two loans for 600 billion Colombian pesos ($180 million), as part of a financing package that included a bond and investment from an infrastructure fund, for a toll road. Concessionaire Autopistas del Nordeste is seeking a dual-currency loan from local and international lenders for another toll road. OHL was heard to be launching a loan for its Autopistas al Río Magdalena 2 toll road and borrowers are working on deals for Girardot-Puerto Salgar and Cartagena-Barranquilla concessions.
Elsewhere in the Andes, Gasoducto Sur Peruano in Peru is undergoing a careful approval process in banks’ credit committees as it seeks $4.125 billion in debt, while in Panama, Odebrecht and Spanish construction company FCC are advancing with an eight-year $1.25 billion financing that would back a second line for Panama City’s subway system. LF