Latin Finance - November/December 2010 - 30

regional infrastructure

multilaterals.” Smaller markets most affected by a pullback of international lending are where multilaterals can make the most difference, Goldschmidt says. Chile, Mexico and Colombia, with somewhat deep and developed local private lending environments, and Brazil, with enormous domestic government sources available, should be less in need of multilaterals, he adds. Product structures should not change much from this year, says Hans Schulz, head of structured and corporate financing at the IDB. His bank expects to work more on the A/B structures seen in the last few years, picking up as big a ticket necessary to get a deal done. “Prices have come down,” Schulz says, speaking in September. “If things get better in Europe, the expectation is that hopefully they will continue to come down.” “We’re probably not going to get to 2007 levels – where people were doing barely [Libor plus] 100 basis points for long tenors,” Schulz says. Now, he explains, lenders would typically demand low 300s for a 10-12 year facility.

been some momentum for infrastructure project financings building up in the US market, which compete for the attention of lenders to LatAm. With a strong PPP model in place, if the US gets going, it could offer opportunities for European and Japanese banks that would crowd out LatAm projects, Schulz says. This might challenge LatAm governments to mobilize and source local funds, such as from the pension funds. But it could also cause strain short-term. Meanwhile, domestic development banks appear set to mirror this role, particularly in Brazil, where BNDES is a lone source of liquidity for long-term borrowers. The country’s private banks are reluctant to extend, while foreign

around 50% – to rise slightly. But BNDES does not see itself crowding out private banks, he explains, as even pre-crisis the domestic market was only able to lend at tenors too short to fund most projects. In areas where there might be some overlap between public and private abilities, such as trade finance, he says the bank is happy to give ground.

Hydro Propels Tenor

Demand Exceeds Supply

However, pricing has not been an impediment to deals moving forward, Schulz says, as there is a lot of pressure on banks to start booking assets. Thanks in part to historically low Libor rates, sponsors have been willing to pay the spread. The main risk is the European debt crisis getting worse, or the US entering another recession, and banks being forced to return to conservative lending practices. Basel III regulations governing long-term capital being hammered out are also important, potentially restricting how much banks can lend long-term. Mostly, private lenders want to do what they can. They are starting to see plenty of opportunity. “There continues to be room for everybody,” says Fuensanta DíazCobacho, head of WestLB’s Americas infrastructure team. “The infrastructure needs in the region are greater than the money available.” Díaz-Cobacho cautions that there has

Excess demand: Díaz-Cobacho banks are averse to currency risk. Even though Brazil was one of the first large countries to return to growth, the BNDES’s heavy lending at below market rates appears to be outlasting its countercyclical crisis role. The big question is how much more BNDES can afford to lend. “Brazil’s private market for longterm funding is still extremely limited, even when you compare it to others in Latin America” says Ernani Torres, head of economic research at BNDES. “Our position is to provide financing where it isn’t available. We can’t run the risk of underinvestment in Brazil due to a lack of financing.” Torres expects the proportion dedicated to infrastructure lending – now

After stumping for previous megahydroelectric projects Santo Antônio and Jirau, BNDES appears set to provide the majority of the $20 billion Belo Monte hydroelectric plant. The 30-year expected tenor would be unthinkable for private lenders. State-controlled Eletrobras and its subsidiaries hold a majority stake in the consortium that won Belo Monte. Banco do Brasil is also set to participate. BNDES is also expected to put up 60% of the Rio-São Paulo bullet train project. The winner of the $20 billion concession is expected to be announced in December. The government hopes to have the ambitious project in place before the 2014 World Cup. Private lending will have to play more of a role in the oil platform sector, considering the $220 billion Petrobras must spend through 2014 to develop presalt reserves. Its suppliers and contractors are expected to tap debt and equity markets going forward, and two of the past year’s largest project financings came from rig builders. In Mexico, Grupo R was able to secure a $225 million five-year loan syndication, as well as a $270 million bond sale this year. In Brazil, Modec, Mitsui and Mistubishi’s FPSO secured $800 million package that included a 15-year $320 million loan. In Early October, Brazil’s Schahin Engenharia was preparing to raise a $270 million six-year drillship refinancing in the bond market.

Looking For Quality

Back on dry land, the Brazilian government was set to award the eastern portion of the Rodoanel highway ringing São Paulo, with bids due open November 4. The two stretches will require a total investment of about 5.0 billion reais, and the winner will hope to access both

30 LatinFinance

November/December 2010
Latin Finance - November/December 2010

Table of Contents for the Digital Edition of Latin Finance - November/December 2010
