facebook
linkedin
twitter
About Us
  • BFSI
  • Energy
  • Infocom
  • Mining
  • Venture
  • Industry
  • Travel
  • Civic
  • Food, Health, Ag
  • Real Estate
  • Responsibility
  • Economy
  • Law & Justice
  • Interview
  • Analysis

Fitch: Colombia’s 4G Highway Project Creates Opportunities And Challenges For Domestic Banks

Posted On May 22, 2015
By : Loren Moss
Comment: Off

Colombia’s transformational 4G highway overhaul project creates business opportunities for local banks, but with those opportunities come funding challenges, says Fitch Ratings. The most significant challenge for 4G is attracting a broad range of international financing. Fitch believes that a funding split of 1/4 international and 3/4 local would limit the potential for larger commitments by Colombia’s banks.

Above photo: The highway between Bogotá and Villavicencio (photo credit: Loren Moss)

The first two of three phases for the 4G highway plan requires approximately $15 billion USD in financing. Local banks are expected to fund up to half of that amount. Fitch analysts see Colombia’s banks holding enough capital to withstand a high growth rate of 4G project loans under such a scenario.
Large Colombian banks such as Bancolombia, Banco de Bogota and Davivienda, along with midsize banks such as Corpbanca, Banco de Occidente, and new regional players including BTG Pactual, ITAU BBA and Santander could participate in 4G’s financing. Each of these banks may require some buildup of internal risk management capabilities relating to project management expertise, as the risks of such loans materially differs from traditional lending such as commercial and corporate loans.
Approximately $4 billion to $5 billion USD of the initial need is expected to be executed through the local capital markets, private debt offerings or other arranged financings. Colombia’s outstanding corporate capital market is roughly $15 billion USD, so international funding is important due to potential capacity constraints with local capital markets, says Fitch. Direct investments from the local pension funds will complement other sources of funding.
The ability of Colombian banks to attract foreign investment will be aided by the recent change to local laws that now allow banks to float bonds in foreign markets. On the other hand, nervousness about US interest rate hikes could be influential on international appetites for emerging market paper.
Another variable is the Colombian government’s completion of the sale of its stake in the state energy company ISAGEN, the proceeds of which are earmarked for Colombia’s government development bank Financiera de Desarrollo Nacional (FDN). FDN is a designated lead arranger in 4G financings and will use the proceeds to support its 4G lending plans.
FDN projects that it will boost its own overall lending by 500% during through 2016. If FDN secures additional sources of third-party funding, the loan portfolio could climb to $750 million in the next two to three years, up from $56 million today. The agency raised $270 million in equity to prepare for making 4G loans. More capital may be raised from other multilaterals. Fitch expects FDN’s capitalization to decline, but remain adequate even in a very high loan growth scenario. Banco Agrario de Colombia, a government-sponsored bank, is expected to work with FDN to supply direct credit.
In order to accommodate the expected high loan growth in anticipation of 4G, Colombia’s regulators have amended concentration limits for infrastructure projects, lifting the limit up to 25% of the regulatory capital. In practice, Fitch expects local banks will hold project exposures to a manageable range of 12% to 15% of total loans to be disbursed over the medium term.

DON'T MISS OUT: The only English-language Colombia news that's strictly business, markets, & investment!
Join global executives & investors by subscribing to our FREE weekly updates
I agree to have my personal information transferred to MailChimp ( more information ) DISCLAIMER: Protección de Datos Personales Artículo 15 de la Constitución Política de Colombia, ley 1581 de 2012 y decreto 1377 de 2013.
We will never spam you or share your email address ¡Nunca Jamás!

Share the news!

  • Facebook
  • Twitter
  • Print
  • Email
  • WhatsApp
  • LinkedIn
  • Skype

Related

Share your thoughts:

comments

About the Author
Loren Moss is the founder and publisher of Finance Colombia. He has over 20 years of international business experience, including over a decade of experience in securities, insurance, and commercial real estate, at the institutional and international level.
  • google-share
Previous Story

Colombia And USA Sign FATCA Anti-Tax Evasion Pact

Next Story

Documentary: Ecuador Flooding Global Migrants Into Colombia Headed For USA





Search

RECENT

POPULAR

COMMENTS

Shelli Ryan Of Ad Hoc Communications Unpacks The Nuances Of Cross-Border Marketing

Posted On June 30, 2022

Post Election Calm Returns As President-Elect Petro Seeks To Build Bridges

Posted On June 30, 2022

Tarkus Labs Obtains INVIMA Cannabis Certification, Seeks US Distribution Partner

Posted On June 30, 2022

Collective Mining Discovers More High-Grade Copper-Gold-Silver Deposits

Posted On June 30, 2022

2022 Colombia Gold Symposium Slated For 8-9 November In Medellín

Posted On June 30, 2022

Romanian Cybercriminal Mihai Ionut Paunescu Captured In Colombia

Posted On June 29, 2021
Photo montage courtesy EPM

EPM’s Board of Directors Resign En Masse, Creating Crisis For Mayor Daniel Quintero

Posted On August 17, 2020
Reason Foundation's Daniel Raisbeck

The Reason Foundation's Daniel Raisbeck On What Peru's Election Can Tell Us About Economic Liberty In Colombia & Latin America

Posted On June 13, 2021

Deadly Riots & Protests Against Police Brutality Break Out Across Colombia

Posted On September 10, 2020

AVIANCA IS BANKRUPT

Posted On May 10, 2020

[…] Colombia started its...

Posted On June 29, 2022

[…] The Reason Foundation’s Daniel...

Posted On June 20, 2022

[…] The Reason Foundation’s Daniel...

Posted On June 20, 2022

[…] Finance Colombia: Colombia and...

Posted On June 19, 2022

[…] Finance Colombia: Colombia and...

Posted On June 19, 2022

Watch This!

Consider Advertising With Us

Click here to visit Expat Group's English site

Subscribe Free

don't forget to include "http://"
* = required field
Your Background / Function








unsubscribe from list

RECENT

POPULAR

COMMENTS

Shelli Ryan Of Ad Hoc Communications Unpacks The Nuances Of Cross-Border Marketing

Posted On June 30, 2022

Post Election Calm Returns As President-Elect Petro Seeks To Build Bridges

Posted On June 30, 2022

Tarkus Labs Obtains INVIMA Cannabis Certification, Seeks US Distribution Partner

Posted On June 30, 2022

Romanian Cybercriminal Mihai Ionut Paunescu Captured In Colombia

Posted On June 29, 2021
Photo montage courtesy EPM

EPM’s Board of Directors Resign En Masse, Creating Crisis For Mayor Daniel Quintero

Posted On August 17, 2020

Deadly Riots & Protests Against Police Brutality Break Out Across Colombia

Posted On September 10, 2020

[…] Colombia started its...

Posted On June 29, 2022

[…] The Reason Foundation’s Daniel...

Posted On June 20, 2022

[…] The Reason Foundation’s Daniel...

Posted On June 20, 2022

Watch This!

Contact Us (Click the image):

Pages

  • About Us
  • Colombia Events, Conferences, Festivals and Important Dates
  • Contact Us
  • main
  • Media Partnerships
  • Privacy Policy
  • Search Results
  • Whatsapp test page
Copyright 2014-2020 Finance Colombia All Rights Reserved. We may earn commissions from qualifying purchases.
Posting....
WhatsApp us