The Inter-American Development Bank today approved a senior loan of up to $60 million for the Central American Mezzanine Infrastructure Fund (CAMIF), which will provide mezzanine lending mainly for private infrastructure projects in Belize, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, as well as Panama and the Dominican Republic.
CAMIF has a proposed target size of up to US$150 million, with additional funding to come from the Central American Bank for Economic Integration (CABEI), other public entities and private investors, who may contribute debt and equity. The fund will also allocate some of its resources to Mexico and Colombia.
Mezzanine lending is a financial instrument that combines debt and equity features. It generally takes the form of an interest-bearing subordinated loan with structured exits, including the amortization of loans, scheduled interest, and equity upsides through conversion rights, warrants or profit participation.
CAMIF will finance projects in energy (generation, transmission and distribution of electricity; transportation and distribution of gas, and alternative sources of energy), transportation (toll roads, railroads, ports, airports and urban and inter-urban mass transit), water and sanitation (including waste treatment, recycling, irrigation and environmental services), telecommunications (fixed and mobile telephone systems, cable and satellite communications), as well as other sectors.
“By providing long-term financing to CAMIF, the IDB supports the development of innovative financial instruments, making mezzanine lending available in a region where it is relatively scarce,” said IDB project team leader Javier Molina. “It will also help develop Central America’s capital markets, as this type of vehicle allows institutional investors to take a portfolio approach to financing infrastructure projects and benefit from risk diversification.”
CAMIF will complement the availability of senior lending in Central America, facilitating the access to debt financing for a larger number of projects in a region that must upgrade its infrastructure to boost competitiveness. The fund should demonstrate the viability of mezzanine lending in Central America, contributing to the development of other similar vehicles.
CAMIF will be managed by the Washington, DC-based EMP Global, which was selected by the IDB and CABEI through a competitive process. EMP Global is a leading manager of private equity investment firms focusing on infrastructure in emerging markets. It has advised and managed funds specialized in Asia, Africa, Eastern Europe and Latin America.
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