The investment banking arm of Colombia's largest bank Bancolombia (NYSE: CIB) is seeking to strike deals with multilateral entities to finance large projects in the country this year as external financing sources have dried up, Banca de Inversión Bancolombia president Rodrigo Velásquez told BNamericas.
"For large projects, we will have to work with the government and multilaterals. We are going to sweat a little, but we have to have other plans," he said.
Colombia recently signed an agreement with the World Bank, IDB and CAF to lend up to US$2.4bn to secure the country's financing needs in 2009.
Banca de Inversión Bancolombia is looking at a record number of projects in the country, especially in infrastructure and electricity, and it also currently working in the privatization of energy companies.
"The projects are already structured but it will take us work to finance them. The slowdown in the economy and greater difficulty in getting funds will surely change the pace of these projects and the viability of some of them," Velásquez said, adding they keep on structuring the financing for Bogotá's El Dorado airport.
Before the crisis, Banca de Inversión Bancolombia saw vibrant activity in M&A deals, especially foreign companies looking to increase their presence in Colombia as well as large and midsized locals that are looking for buys in South America and Central America.
The bank also has mandates from Peruvian and Central American corporates to buy in Colombia and South America, he said.
"So far, our portfolio of projects has not fallen through. But we see that closing deals over the next few months will not be easy," said Felipe Pérez, the unit's VP.
Banca de Inversión Bancolombia has this year closed large M&A deals that chipped in some 3.5bn pesos (US$1.52mn) in fees, also placing bonds to the tune of 1tn pesos as it maintains activity in Colombian markets.
OPPORTUNITIES AMID THE CRISIS
Pérez said the demise of large US investment banks will likely lead to a number of opportunities for local players such as the Bancolombia unit.
"Foreign players are now going for deals where they can get their customers higher returns in US dollars and they are not going to come looking for those returns in Colombia," he said.
Banks may also ask for twice as much in fees as usual "so we no longer compete with them on a level playing field because they will be out of our comfort range," Pérez said.
The bank also sees opportunities coming from developing more complex financing structures in the local market, including derivatives.
"We will have space to develop more complex structures for customers that need US$100mn or US$150mn and special derivatives structures. Foreign banks will not come down from large companies".
Velásquez said he expects investment returns to boost the unit's 2008 profits by 25-30% but fee income will likely remain in line with last year's.
Net profits at the unit were up 8.2% to 23.3bn pesos last year.
In 2007, Banca de Inversión Bancolombia led 24 transactions worth over 14tn pesos, with the bulk of activity coming from IPOs, which represented 6.8tn pesos. Banca de Inversión Bancolombia's fee income totaled 21.7bn pesos in 2007.
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