InTrust Global Investments exploring local viability of long-term sale-leaseback structure

BANKING/FINANCE 10 CARIBBEAN BUSINESS THURSDAY, SEPTEMBER 9, 2010
BY JOSÉ L. CARMONA

Washington, D.C.-based investment firm InTrust Global Investments LLC is exploring the viability of financing local public-private partnership (PPP) projects through the long-term sale-leaseback financing structure. InTrust Global Investments CEO Francisco Acuña said the sale-leaseback structure provides great competitive advantages when financing projects over a long term.

“It allows investment firms to finance large infrastructure projects long term by only using debt, thus removing the equity element out of the equation,” Acuña told CARIBBEAN BUSINESS during an exclusive interview.

Mr. Acuna from InTrust Global Investments, mentioned that InTrust’s relations have directly or indirectly invested over $8 billion in all kinds of projects, the vast majority using the sale-leaseback structure. InTrust is focusing in advising on this financial structure Throughout Latin America, including current ones in Costa Rica, Mexico, Brazil and Chile.

“We are very excited with Latin America, because it is probably the region with the most infrastructure potential in the world, ”Acuña said. “Our added value is our commitment to work very closely with institutional investors and local governments to explain to them why concrete projects in Latin America are a safe place to invest.”

The CEO indicated that before the 2007-08 global financial crisis, many of the world’s large infrastructure projects were being financed through high levels of debt.

“By 2008, that turned around completely. Now banks and investors want to see more equity,” Acuña noted. “We then decided to advise on the packaging and structure of local projects in the region through Rule 144A to get institutional investors to invest secure and well managed projects in Latin America through debt and investment grade guarantees.

Through local efforts by Capital Fidelity Corp. CEO Carlos Rosso, Acuña said he has been educated on the local PPP law and the various PPP projects being promoted by the government. To that end, Acuña has had initial conversations with PPP Authority Executive Director David Álvarez. “We’re barely starting our approach with the local government,” Acuña said. “The key here is to identify project operators that are entering, because eventually they will be the ones who will finance the project. The triangle formed by operators, developers and the government is the one we are interested in.”

Several of the world’s largest global infrastructure investors are expected to participate in Puerto
Rico’s PPP procurement process, including Abertis, Atlantia, CCR, Global Via and Transurban, as well as contractors like ACS, Ferrovial Cintra and OHL. Acuña said his company’s institutional investors, such as insurance companies, have expressed to his Firm their interest to invest in long-term projects in the U.S. and Latin America through InTrust Global Investments.

“What we have noticed so far in Puerto Rico is that there has been a vision to recognize the need to develop these PPP projects along with the private sector,” he said. “What we’re exploring
right now is if in fact Puerto Rico could finance many of these projects long term.”

Although the type of project to be financed has some weight, more important is if the PPP projects have the international credit rating that InTrust and its institutional investors are looking
for, Acuña said. The majority of the projects must be of more than $40 million to be viable, especially if they are infrastructure projects, he said. “The second requirement is that it has to be financially viable,” he said. “That’s where the traditional standard requirements to invest in a project come in. But if it has the international credit rating we’re seeking, that gives us more flexibility in structuring the financing.”

Source: Caribbean Business, Thursday September 9th, 2010