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Infra refinancings find an open window
09 May 2011
Financial infrastructure investors have launched a series of refinancings in recent weeks, as mini-perm deals that closed before the crunch come due. Low interest rates and a surge in high-yield interest has compensated for banks’ cautious approach to leverage. By Robin Sayles.
A recent spate of issues from infrastructure operating and holding companies has highlighted renewed bond investor interest in the sector. The impending arrival of tighter capital adequacy regulations in the shape of Basel III has reduced the number of active project finance banks. Even before the contours of Basel III were apparent, lenders were turning to infrastructure owners to de-lever assets that they acquired at vast expense before the crunch.
Banks’ desire for lower levels of exposure leaves a funding gap that sponsors need to fill, whether with equity or other types of debt. Projects that have performed well may be able to fill this gap, but struggling projects have had fewer options. The luckiest borrowers are highly regulated companies with stronger credit ratings, such as UK water firms, which have been able to tap investors in both senior and junior bond markets. But smaller, riskier issuers are also tapping sub-investment...
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