Odebrecht Transport, part of Latin America’s
largest construction and engineering group, is actively
considering further project finance bonds and finding local
banks more willing to lend at longer tenors and lower
The move, which echoes a wider trend in parts of the region,
was partly linked to the decline of short-term interest rates
in Brazil, Marcelo Felberg, its financial director, told
Emerging Markets in an exclusive interview.
The Brazilian central bank cut its benchmark Selic rate by
75 basis points to 9.75% on March 7. High rates had long been
seen as a factor that crimped lending by Brazil’s
commercial banks as it prevented them competing with
international banks offering loans in US dollars and with
subsidized loans from the state development bank BNDES.
For now, tenors are typically capped at 10 years. However,
the large banks that dominate the market are starting to
consider longer loans, which Felberg expected to become
Odebrecht is also actively looking at tapping the project
finance bond market again. The company was a pioneer two years
ago when it financed a subsidiary carrying out a road
concession in São Paulo state with a R$1.1 billion ($605
million) non-recourse 12-year inflation-linked bond, he
Non-recourse loans, where lenders shoulder more risk as
sponsors do not put up collateral, imply high levels of lender
His company would evaluate the pricing, tenor availability
and liquidity among institutional investors in deciding whether
to move ahead with such financing, he said.
That message of diversifying funding is echoed by banks who
are telling sponsors in countries with liquidity, that they can
plug the funding gap as the European crisis bites in Latin
Financial institutions from Europe have either absented
themselves altogether or charge higher rates as they struggle
to find reasonable access to US dollar financing and hoard
capital to ensure they can ride through the sovereign debt
Fuensanta Diaz Cobacha, managing director at European bank
WestLB, said the number of banks involved in the sector has
dropped dramatically since 2005, from some 40 to fewer than
But she said there were still plenty of sources for project
finance funding in the region, including local institutions and
capital markets. Mexico is looking to refinance a number of
existing road assets through the bond markets, she noted.
Local banks are increasingly sophisticated and hiring senior
bankers to mount proper project financing teams although most
are only available for relatively small tickets in a deal.
Local pension funds are also increasingly coveted as a
source of financing, while Asian institutions, particularly
export credit agencies and development banks, were also
becoming more active, Cobacha said.
Multilaterals too are playing a greater role in financing
project finance deals and helping to consolidate these new
players in the market.
However Everton Walters, managing director at Barbados port,
said demand for financing of infrastructure outweighed supply
and that project feasibility studies often led to cancellation