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Infrastructure investors eye flexible debt terms in Latin America

Todd Koretzky and Dorina Yessios write in The Banker.

Top-tier private equity investors are circling LatAm’s energy and infrastructure assets, drawn by the potential for higher returns and geographic diversification for their portfolios. At the same time, they are importing more flexible borrowing terms typically only available in developed markets, putting pressure on lenders to be more accommodating in order to remain competitive.

While still early days, some international and local banks have started agreeing to LBO-style acquisition financings and loans for LatAm operating assets with terms that allow them to borrow and invest more as they grow, a departure from the region’s historically conservative credit agreements. It’s likely these leveraged finance style deals will remain an exception rather than the rule in the near-term; however, as we have seen in other markets, once the most well-known sponsors have successfully negotiated favorable debt terms, others will want to follow.

Time will tell how dramatic that shift is and how quickly it becomes the market practice.

This is an abridged summary of an article published in The Banker on July 8, 2021.