Infrastructure Report: Financing innovation: The way back

Jan 1, 2014

Bond investors are showing a renewed interest in financing Latin America’s infrastructure. But bank lending still offers advantages that the markets cannot. By Joti Mangat

After several years of aggressive growth, banks are slashing project finance lending in Latin America. In the year to late November 2013, banks had lent 43% fewer project finance funds—89 loans for $16.9 billion-equivalent —than in all of 2012.

Meanwhile, project sponsors are increasingly using the bond markets favoring, in particular, sales of local currency debt to domestic investors. Latin American firms issued 15 project bonds worth $5.4 billion-equivalent in the first 11 months of 2013, up from $4.2 billion-equivalent in the previous year, and $2.2 billion-equivalent in 2011.

Energy projects accounted for around half those deals. Public infrastructure projects – including roads, government buildings, hospitals, ports, waste, water and sewerage – made up the other half, Dealogic data shows.

Despite commercial banks’ historical role in construction finance, project lenders, sponsors, investors and rating agencies all agree that the bond market’s share of Latin American infrastructure financing...

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