Top-tier private equity investors are circling Latin America’s energy and infrastructure assets, drawn by the potential for higher returns, as well as geographic diversification of their portfolios. As they do so, they are seeking to import some of the more flexible borrowing terms customarily only available in developed markets, putting pressure on international and local banks to be more accommodating in order to remain competitive.
The advantages are clear: fewer restrictive covenants and higher leverage limits give sponsors the freedom to increase borrowing, thereby fuelling the expansion of their asset bases. Doing so means that they can fulfil their ‘buy-and-build’ investment theses, without having to continually ask their lenders for waivers and approvals.
