One market’s loss is another’s gain. Bond issues from Mexico all but ground to a halt after Donald Trump won the US presidential election in November. Uncertainty over Trump’s trade policies looms over Mexico, but businesses still have to raise funding, both in dollars and in pesos. With the bond markets closed, or at least priced beyond the reach of many potential issuers, companies will likely look to get bank loans, at least for the short to medium term.

“A lot of people are afraid of what’s going to happen,” says an investment fund manager in Mexico City, adding that companies will have to look at bank debt as a stopgap measure to fund their investment plans.

Mexico is opening its electricity sector — including new transmission lines worth $15 billion needed by 2030 — to private investment. Developers are looking to raise funding in dollars but they may find it difficult such large amounts, sometimes reaching up to $1 billion. 

“It’s going to be very difficult to finance all these infrastructure projects that the government wants to do,” the fund manager says. “The money will be there, but it will be more expensive.”

But a New York-based loans banker says he is not sure that his market will see more activity as bonds drop off. Some businesses may wait to make investments, staying out of the financial markets altogether, he says. “I know that every deal we’ve done has received a lot of attention but I just don’t know what is going to happen now.” 

Altán, the winner of a 20-year contract in November to develop the Red Compartida wireless telecommunications network in Mexico, is under the gun to get some $1.75 billion in financing in place before a January 27 deadline. The consortium, with support from national development bank Banobras, has turned to two equipment suppliers — Huawei and Nokia — to provide funding for the project. 

Banobras, export credit agency Bancomext and development bank Nafin will lead a $650 million A loan and arrange for Huawei and Nokia to sell the $850 million B loan to commercial lenders. Banobras is set to chip in an additional $250 million line of credit, while Atlán is contributing $750 million of equity.

Many banks could join the Red Compartida financing if recent deals are anything to go by. When Grupo Bimbo closed a revolving credit facility for $2 billion in the fourth quarter, it took 10 banks to provide the multi-currency, five-year facility. Pemex had 17 banks on its latest revolver — a three-year facility for $1.5 billion. Fermaca added a new lender, the Korea Development Bank (KDB), when it closed $435 million in eight-year financing from 10 banks for the Villa de Reyes-Aguascalientes-Guadalajara natural gas pipeline concession. Bio Pappel got funding from 17 banks in a $409 million loan split between pesos and dollars.

Three German banks — KfW, BayernLB and DZ Bank — were also undeterred by politics north of the border and closed a 10-year syndicated loan for a new BMW plant in Mexico. At least two other syndicated loans in Mexico — $500 million for local retailer Liverpool and $150 million for the IT services company Softtek — remained in the market near the end of last year, but they were said to receive positive responses from lenders.

Commitment to Colombia

One bank, Japan’s SMBC, has again proven its commitment to Colombia’s infrastructure sector and granted a 12-year, $250 million loan to Navelena, the project sponsor behind the waterway public-private partnership (PPP) on the Magdalena River.

Brazil’s Odebrecht, cut off from the financial markets by corruption allegations, had tried to sell a controlling stake in Navelena to make financing easier but its board of directors refused a takeover offer from Mexican developer Ideal. With the deadline approaching, SMBC stepped in but it left the door open for Goldman Sachs to arrange inflation-linked bonds in the local market.

SMBC, which owns 8.84% of the Colombian development bank FDN, is syndicating 2.2 trillion Colombian pesos ($730 million) in financing for the Autopista al Mar 2 toll road concession, under development by a consortium led by China Harbour Engineering Company (CHEC). SMBC is also raising between $300 million and $400 million for a 25-year infrastructure debt fund in Colombia with Brazilian bank BTG Pactual.

The Autopista al Mar 2 was the last project awarded in the second round of Colombia’s 4G concession auctions in September 2015. LF