The corporate loans market remained in low-gear during March and April. First quarter numbers showed that banks lent $5.1bn to Latin American corporates in the first quarter, roughly a third of that disbursed in the same period in 2015, according to data from Dealogic. Capital markets volatility and Brazilian turmoil have contributed to a very thin pipeline of deals.
“Brazil was half the market, and now it’s very difficult to get business done there,” a banker says.
“The Brazilian borrowers that are coming to the loans market are finding out that tenors are shrinking,” says another. “Where it was possible for them to get a five-year, now the offer is a three-year deal, and credit committees are taking longer to assess the terms.”
Elsewhere, lenders still look favorably to clients from Mexico, Colombia, Peru and Chile.
A loan to Axtel underscores lenders’ openness to blue-chips. The Mexican telco upsized a syndicated loan to $835m, having initially sought $750m. Sixteen banks participated in the dual-currency transaction that included a $585m five-year portion priced at 250 basis points over Libor and a peso-denominated $250m three-year part at 225 basis points over TIIE.
Meanwhile, McDonald’s franchisee Arcos Dorados signed a four-year 614m real ($167m) deal with five lenders, paying 450 basis points over Libor. The deal securitizes receivables from credit and debit card sales at restaurants managed by its Brazilian Åsubsidiary.
New deals have come to the market in the past two months. Panama’s Global Bank has launched a syndication for a $104m dual-tranche loan. Mexican Grupo R is seeking a $317m 7.75-year loan and hired BBVA, HSBC, Sabadell and Santander to lead the syndication. Brazil’s electric utility CPFL Energia is aiming at a $200m five-year loan.
Slow times
The project finance market has been subdued this year, although bankers are at least optimistic about the pipeline. Mexico, Chile, Central America and Colombia have important infrastructure portfolios to push forward.
The scarce activity has triggered competition among banks. Japanese lenders are thriving in this environment, able to provide sweeter terms and be more aggressive as financial advisors and lenders, a banker says.
Colombian highway deals, part of the 4G infrastructure development program, have been approaching financial closures.
After completing a financing package for Autopista Conexión Pacífico 3, the Colombian and Costa Rican developers Mario Alberto Huertas and Meco are moving ahead with the financing of two other toll roads, the Girardot-Honda-Puerto Salgar highway and the Cartagena-Barranquilla road. Concessionaire Covipacifico is also negotiating terms for the financing of the Pacífico 1 project and Autopistas del Nordeste is working for the funding of the Conexión Norte highway.
In Mexico, developer Fermaca is understood to be negotiating the financing for two natural gas pipelines.
Meanwhile in Brazil, a joint venture comprising local agricultural trader Fiagril and US-based agribusiness Summit Agricultural Group signed a $50m loan from US ag-tech developer Midwest Oilseeds Global to fund the first corn ethanol plant in the country.
In Chile, Aela Energía, formed by UK companies Actis (60%) and Mainstream Renewable Power (40%) is seeking up to $600 million to fund two wind farms. Additionally, two hospitals in public-private partnership in Santiago are seeking funds. Hospital del Salvador is targeting roughly $300m in local currency and Hospital Félix Bulnes is raising the equivalent of $250m.
However, the presence of Brazilian builder Odebrecht in several concessions is raising concerns and delaying financial closures. Odebrecht Latinvest announced that it is looking to sell its stake in Peruvian natural gas pipeline project Gasoducto Sur Peruano and hydroelectric Chaglla. As well, the financing to the second line of Panama City’s metro system has stalled and the project to recover and improve the navigability of the Magdalena River in Colombia is at risk, as consortium Navelena is majority owned by Odebrecht. LF