BNDES - Brazilian Development Bank

BNDES announces agreement with banks to share guarantees and collateral in infrastructure projects


Measure aims to reduce costs in financing processes. New practices will grant loan to the winners of the auctions of airports

BNDES closed an agreement with the main public and private banks in the country for the sharing of guarantees and collateral in the financing of infrastructure projects. The model is unprecedented in contracts signed by the Bank and aims to reduce costs in long-term operations in the country. 
Since last year, when BNDES ceased to grant bridge loans, it has been studying ways to enhance the financing of projects. Under the agreement, banks that offer guarantees equivalent to at least 40% of the total financing will be entitled to share the guarantees and collateral with BNDES. 
The rule is valid for syndicated loans, i.e., granted by a union of banks. The financial institution that individually has relevant participation (minimum 20%) in the project, will also have access to the guarantees and collateral. 
The rules are valid mainly for the pre-completion phase, i.e., prior to the completion of a project, which is of higher risk. Today, overall, companies present the bank guarantees to the extent that they have disbursements to receive and with that there is asymmetry of information, conditions and maturities in the same project. Generally these guarantees cover the first two years of a project and the ideal is for them to be extended from four to five years when the projects have already presented operational viability. 
“The sharing of guarantees and collateral will provide the best allocation of risks of the infrastructure projects, increasing predictability for the guarantors, potentially reducing costs,” says Claudio Coutinho, director of Credit, Financial and International divisions of BNDES. 
The sharing of guarantees and collateral should be adopted already in the financing to the consortia that won the granting auctions of the airports from Fortaleza, Salvador, Porto Alegre and Florianópolis, in March of this year and those of São Paulo highways.
Today BNDES is the largest financier of infrastructure projects in the country, having disbursed R$ 988 billion, in constant values, in the last ten years. We expect that with the sharing of guarantees and collateral model, the projects can attract new players such as large foreign financial institutions, which could help to finance the Brazilian infrastructure. 
“The most important thing is for the set of guarantors of a project to be known at the start and everyone involved to be aligned and committed to the same long-term vision. To do so, it will be essential for the banks that provide the guarantees to be familiar with the risks of infrastructure projects,” said Luciene Machado, superintendent of the Sanitation and Transportation Area of BNDES.


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