Infrastructure finance: A race to the bottom

In their rush to capitalize on infrastructure privatizations, lenders are pushing their risk criteria to the limit.

Infrastructure finance used to be so simple. Banks took on short-term bridge and construction risk; the capital markets took on long-term operational risk. Bank lending appetite for this risk was for five years with a two-year tail – anything longer than that was the preserve of the wrapped bond markets.

The prospect of more large-scale infrastructure assets being financed in the private sector has been seized upon by lending banks and capital market players as a key part of their near-term business strategies.

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