A period of high interest rates and economic headwinds have made it challenging for companies in Latin America to secure financing for transactions. Against this backdrop, businesses, dealmakers, and lenders have increasingly turned to innovative securitization and structured finance products to execute deals.
Recent reports suggest structured finance issuance in Latin America has remained resilient despite broader market pressures. In its latest outlook report, published in December 2024, Fitch Ratings noted a sustained appetite for securitized transactions across a variety of sectors, driven by the need for flexible financing solutions.
However, the enduring impact of an extended period of high interest rates between the first half of 2021 and early 2024 means traditional lenders and banks are still cautious about new lending. Instead, they are focusing largely on existing loan books. This has created opportunities for structured finance providers to unlock capital for companies and investors through novel structured financing options.
A bespoke and flexible option
Structured finance in Latin America involves a broad range of products and solutions that can be tailored to a client’s specific needs. While domestic players are highly active in their home markets, a significant volume of cross-border activity persists. Issuers increasingly weigh the option of domestic structured finance deals against accessing a global investor base, particularly when domestic markets lack sufficient capacity.
Future-flow securitization remains a cornerstone of Latin America’s structured finance landscape. In these transactions, predictable cashflows—such as those from export contracts, oil and gas revenues, or credit card receivables—serve as the collateral to secure financing. In commodity-dependent economies, future-flow securitizations enable companies to monetize future revenues from exports of minerals such as aluminum and zinc.
Liquidity, pricing and tenor benefits
Structured finance offers clear advantages, particularly in tight capital markets. Facilities secured against assets or future-flow receivables often provide lower margins than conventional loans, alongside longer tenors. These attributes are especially appealing to borrowers navigating maturity walls or seeking cost-efficient ways to refinance debt.
The upfront structuring costs of structured finance facilities are higher, but the long-term benefits often outweigh these expenses. For example, cross-border future-flow securitizations involve creating bankruptcy-remote structures and obtaining credit ratings to enhance investor confidence; however, these complexities yield access to more favorable pricing and extended repayment schedules.
The proceeds from structured finance deals are often used for general corporate purposes or to refinance near-term debt. They have also been popular as a complement to project financing debt, with structured financing options providing opportunities to secure sustainability-linked debt for projects that meet high ESG standards. Meanwhile, specialized lenders, such as payroll lenders, have found structured finance to be a valuable growth lever that allows for existing portfolios to be leveraged, with the proceeds used to invest in new businesses and grow loan books.
Outlook for 2025
The outlook for Latin America’s structured finance market in 2025 remains optimistic. While interest rates have stabilized, the debt markets continue to present challenges, with pricing remaining above pre-2022 levels. Structured finance, however, is uniquely positioned to address these challenges. Its appeal is not tied to cyclical market conditions but to the inherent value it offers borrowers who have the revenue streams and assets necessary to secure lower-cost capital.
With the potential for further legislative and regulatory developments across key markets, issuers equipped with the technical expertise to navigate these transactions will remain well positioned. Structured finance will continue to provide liquidity, lower costs, and longer maturities, offering a valuable alternative for companies amid volatile economic conditions.
