Airports, toll roads taxi towards restructurings in LatAm
June 30, 2020 |
Travel restrictions force concessionaires to consider delaying debt payments, but some may be able to cushion the blow for a few years
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Many airports and toll roads in Latin America may have to restructure their debts as the travel industry struggles to recover from the COVID-19 pandemic, although some might be able to cushion the blow for a few years, sources told LatinFinance.
"Roads have been badly affected, and airports more so. It will take quite some time for them to recover pre-COVID-19 levels," said Mikel Peña, head of project finance in the Americas for Spanish bank BBVA.
A couple of airport operators – Aeropuertos Argentina 2000 (AA2000) and ACI Airport SudAmérica – carried out bond swaps in May, offering higher yields for longer maturities, while toll roads are feeling the pinch from travel and trade restrictions during the pandemic.
Other airports will likely follow suit, looking for ways to delay their debt obligations as earnings remain below levels from before the coronavirus outbreak, but they may be able to hold out until things get back to normal.
"If the asset was fine before the crisis, then one, two, or three years from now, normalcy could return, so that is a way by which these assets can be restructured," said a project finance banker in New York.
According to Peña, whether a company decides to restructure its debt will depend on where it is in the investment cycle, not just on how much cash or how much debt it has. To handle the liquidity crunch, however, borrowers have drawn down from revolving credit lines and lined up short-term funding, he added.
"On the corporate side, so far liquidity in the bank market has been very healthy and robust. Banks are still deploying financial solutions, though it might be pricier and more short-term," Peña said.
In the electricity market, many banks took a conservative approach to non-regulated power contracts, but projects with offtake agreements with clients in the commercial and industrial sectors will feel increasing pressure, sources said.
"Projects that just entered the commercial stage may also be especially vulnerable. We are already witnessing legal challenges around force majeure," said a second project finance banker in New York.
In the telecommunications sector, however, the outlook is more positive. Mexican telecom América Móvil took advantage of that investor confidence in the middle of the pandemic when it sold $1 billion in new 10-year bonds and repurchased €1.32 billion ($1.48 billion) in convertible notes in early May.
"TMT names, such as data centers, tower companies and fiber networks will do very well. It's amazing how people are running systems from their homes, clearly a system that stands to benefit from what is happening," said Willem Sutherland, head of wholesale banking for Latin America at Dutch lender ING.