CHILE Law and Practice Contributed by: Macarena Ravinet and Federico Espinosa, Cuatrecasas
banks to offer lighter covenants, greater refinancing flexibility, and hybrid structures. With global credit spreads high, Chilean companies have mainly used three strategies: tapping the local UF bond market for refinancing, conducting liability-management transac- tions internationally, and, in distressed cases, utilising U.S. Chapter 11 and DIP financing. The UF market has been crucial, as seen in SalfaCorp’s UF-denominated notes, which extended maturities with onshore instru- ments. Offshore, liability-management deals – often by Holdco issuers – have addressed maturity walls. In stressed scenarios, WOM’s restructuring highlights the impact of cross-border processes and US-style protections. The market has also driven higher cou- pons, flexible covenants, enhanced security, and ESG integration, setting benchmarks and standardising documentation in Chile. 1.4 Alternative Credit Providers The Chilean loan market has witnessed the emer- gence of alternative credit providers, including private debt funds, institutional investors, and regional non- bank lenders, whose presence is growing in sectors such as infrastructure, renewable energy, and mid- cap corporate financing. These entrants offer greater structuring flexibility, higher risk tolerance, and long- er or mezzanine financing options that banks often avoid. In response, traditional banks have eased cov- enants, provided more borrower-friendly refinancing, and participated in club deals with non-bank lenders. This competition has spurred innovation, including unitranche structures, payment-in-kind features, and customised intercreditor arrangements. The regulatory landscape, notably the 2023 Fintech Law (Law No 21,521), has established a robust frame- work for alternative finance, enhancing transparency and market confidence. The Financial Market Com- mission’s open banking initiatives further support secure data sharing and improved credit assessment. As regulation and digital adoption advance, alternative lending is set to remain a vital component of Chile’s credit market.
ed and flexible financing structures, driven by the evolving needs of borrowers and investors, as well as the increasing participation of international inves- tors. Large corporations and infrastructure sponsors are adopting advanced structures and instruments that were previously common in developed markets. This evolution involves more complex intercreditor arrangements, which accommodate banks, institu- tional investors, and alternative credit providers within the same capital structures. Adoption of HoldCo Structures A key development is the widespread adoption of holding company (HoldCo) structures in acquisition and project finance, particularly in sectors such as energy, infrastructure, and telecommunications. Hold- Co structures enable sponsors to ring-fence liabilities, manage tax costs, and layer various types of capi- tal – such as senior, mezzanine, and subordinated debt – across different levels of the corporate chain. These structures are increasingly accepted by lend- ers and investors, provided that robust intercreditor arrangements and cash flow waterfalls are in place, allowing for diversified revenue streams and flexible debt-raising options. Preferred Equity and Hybrid Instruments There is a notable rise in the use of preferred equity and hybrid capital instruments, which appeal to spon- sors and investors seeking to balance risk and return, particularly when traditional debt capacity is limited or concerns about dilution exist. These instruments, often used in conjunction with senior debt and com- mon equity, feature tailored terms such as payment- in-kind interest, step-up coupons, and conversion rights, and are frequently combined with debt in hybrid financings to meet the needs of capital-intensive sec- tors. ESG Integration, Syndication and Digitalisation Sustainable finance is increasingly important, with borrowers integrating ESG criteria into financing strategies through green and sustainability-linked loans and bonds, often tied to specific ESG targets. Syndication, club deals, and private placements are becoming more common, providing access to larger capital pools and diversified funding. Digitalisation and fintech collaborations are streamlining processes,
1.5 Banking and Finance Techniques Sophistication of Financing Structures
The Chilean banking and finance market is under- going a pronounced shift toward more sophisticat-
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