FDN ups locally denominated lending to 4G

Colombian development bank Financiera de Desarrollo Nacional (FDN) has signed its first loan under its peso funding line initiative – a $200 million equivalent peso-denominated loan to the Inter-American Development Bank (IDB). The peso initiative is designed to enable foreign institutions to lend to Colombian infrastructure projects in local currency and bridge the growing funding gap in Colombia’s 4G roads programme caused by lack of local bank appetite.

Until the Ruta al Mar combined bond/loan financing in February, the pace of Colombia’s 4G roads programme had stalled – in part due to lack of liquidity caused by years of low oil prices, but mostly due to fallout from the Odebrecht scandal. In 2017 Odebrecht was ordered to transfer its Ruta del Sol road concession to the National Infrastructure Agency after allegations of bribery. Colombian banks lent around $800 million to the project but the deal was structured more like a corporate borrowing than a project financing, consequently there is little certainty of repayment.

Although the 4G programme – which in total requires around $14.5 billion of debt – comes with much stronger security than the Ruta del Sol concession, local banks remain wary. Domestic lenders have accounted for 41% of the debt that has been used to fund the 11 projects that have closed so far, with 25% coming from institutional investors, around 15% from international banks and the remainder from FDN. Local lender appetite is expected to drop to around 30% be the end of 2018 and FDN hopes to increase international bank participation to around 20%.

The IDB deal is expected to be followed in the coming weeks by the signing of a COP250 billion ($90 million) loan to Spain’s ICO and a $100 million equivalent peso loan to CAF. FDN is also in talks with five commercial banks to provide them with similar facilities.

At the project level, FDN can now lend up to 25% of project costs, up from a previous limit of 10%. The development bank has approved a COP403 billion 14-year senior loan for the Ruta del Cacao project and a COP105 billion 24-year liquidity line. It has also signed off on a COP172 billion 13-year loan and a COP50 billion liquidity line for the Transversal del Sisga project.