Americas: the infrastructure debt helds up well in the crisis
Thought leadership pieces
by Bhaswar (Joy) Chatterjee, co-head of Americas credit syndicate, Natixis CIB Americas
The infrastructure debt finance market largely proved its resilience during the Covid-19 pandemic. The sector maintained its reputation for greater lender protections and lower volatility than other alternative asset classes. .
In the second quarter of 2020, 27M$ worth of project financing was secured in America: a decrease of 30% compared with the same period in 2019, showing a disparity between Latin America (-78%) and North America (+30%). Project bonds tripled due to the appeal of low rates for borrowers.
In times of uncertainty, lenders – banks and institutions – are particularly attentive to the evolution of the portfolios of ongoing projects. The latter performed well overall: there were fewer construction delays than anticipated and those that did materialize were well accounted for in the financing plans. The divisions whose revenues are protected by purchase agreements (as with energy-supply for example) have also held up well. The sectors which have been most affected are those whose revenues are subject to merchant risk – in particular transport and the oil sector, with the decrease in value of reserve-based lending.
For regional banks with less diversified portfolios, withdrawal from the market in the period of March-May became the norm in order to concentrate on portfolio monitoring, much like investors. For large banks active in project financing, the focus remained on key clients and investment grade deals.