Peru Insight: MEF announces the launch of the first Securitisation Trust to Finance Urban Mobility Infrastructure Projects

Last week, Peru’s Ministry of Economy and Finance (MEF) announced the launch of a securitisation trust to finance urban mobility infrastructure projects in Lima and Callao (the "Infrastructure Trust").

This would be the first trust of its kind and would reportedly be used to finance the design and construction of Lines 3 and 4 of the Lima Metro, works that would be executed through the Government to Government Agreements mechanism (which is the mechanism being used, for example, for the construction of the Chinchero Airport in Cuzco and the new Central Highway, among other projects).

Although the MEF has yet to provide more details on the structure of this first Infrastructure Trust Fund, the Government is seeking to raise funds from private investors in the domestic and international markets through the issuance of debt (securitisation bonds) for an amount of approximately US$10 billion.

To this end, the Government would transfer certain assets (probably flows) of projects currently in operation as well as an initial monetary contribution to the Infrastructure Trust Fund, which would serve as backing for the bonds it issues in favour of investors, together with the future flows of the projects whose execution is financed with the resources obtained (which, in this first Infrastructure Trust Fund, would be Lines 3 and 4 of the Lima Metro). It is not excluded that some other guarantee from the Government may be required for the benefit of the bondholders.
It is very positive that the MEF is taking creative measures to finance the execution of projects that have been waiting for a long time to be completed and whose impact on the quality of life of the users (in this case, the citizens of Lima and Callao) is very significant.

The success or otherwise of this Infrastructure Trust Fund will depend, in my opinion, on the strength of its financial structure in the eyes of domestic and international investors, so that they feel comfortable with the payment of the bonds.

The MEF has also indicated that this first Infrastructure Trust Fund could later be replicated for other projects, although it has not yet been informed which would be those projects whose construction could also be financed through this tool.
It is expected that these projects, once their construction is completed, will be subject to an international tender to select a world-class company to be in charge of their operation and maintenance through a Public-Private Partnership.