Clemente del Valle, CEO of FDN, said that a dampening in local bank appetite had led the development bank to “very actively trigger alternative sources” of financing.
It was the first loan signed under FDN’s peso funding line, and del Valle told GlobalMarkets that a Ps250bn ($87.8m) loan to Spain’s ICO (Instituto de Crédito Oficial) would be signed within two or three weeks.
Finding peso-denominated funding for the 4G programme, which in total requires $19bn of financing including around $14.5bn in debt, has been FDN’s main challenge, according to del Valle.
Given the small number of players in Colombia’s local bank market, FDN — which was founded to catalyse investment in infrastructure in the country — always knew that it would need to look abroad to finance the projects.
But that need became more pressing in 2017 when disgraced Brazilian construction firm Odebrecht was ordered to transfer its Ruta del Sol road concession to the National Infrastructure Agency. Odebrecht is alleged to have paid bribes to win the contract.
Colombian banks had lent around $800m to Ruta del Sol, part of the previous “third generation” group of road projects. With construction stalled and uncertainty lingering as to whether they will be repaid, these banks have expressed concerns that they will “not have the same level of appetite” until the situation is resolved, said del Valle.
“Unlike the 4G projects, Ruta del Sol was more of a corporate finance deal than a project finance deal, and was based on the name and quality of the sponsors rather than the credit,” said del Valle. “The loan was very badly protected. We’ve been telling the banks that they cannot punish a good programme like 4G because of the problems in the past, though I understand their perspective.”
Del Valle now believes that international bank participation could increase closer to 19%-20%, with FDN itself also able to lend more, and local lenders dropping to around a third by the end of 2018.
His assertion that international banks were becoming more active was also backed up by some of the lenders.
“It took a long time to get the approvals required, but we are now very excited about 4G and see it as a huge opportunity both on the loan and bond side,” said a banker at one international commercial lender.
As well as the peso funding line, institutional investors have stepped up with specialist Colombia infrastructure debt funds from the likes of Ashmore lending directly to projects, and some concessionaires issuing project bonds.
FDN hopes for at least one or two more project bonds to emerge from the programme, with those projects that have well-known international sponsors the likeliest candidates.
FDN, which the government capitalised using the proceeds of the sale of energy company Isagen in 2016, can also now lend up to 25% of the needs of each project, up from a previous limit of 10%.
Furthermore, the development bank is considering mini-perms, which it would swap