CHILE Law and Practice Contributed by: Macarena Ravinet and Federico Espinosa, Cuatrecasas
workouts with creditors, including debt reschedul- ing, covenant amendments, debt-for-equity swaps, or new funding arrangements. These arrangements occur outside formal insolvency proceedings and lack an automatic stay, allowing creditors to potentially still enforce their claims during negotiations. Such restructurings are most effective when main creditors cooperate, often involving temporary for- bearance if the borrower is transparent and credible. While there is no statutory pre-packaged restructuring framework, out-of-court agreements can avoid formal insolvency if creditor consensus is strong. If over 75% of creditors by class agree, court approval can bind all creditors. 7.5 Risk Areas for Lenders In Chile, borrower insolvency triggers an automatic stay upon court decision, halting individual enforce- ment and requiring all creditors, including secured ones, to join collective proceedings, which can delay recoveries and weaken negotiation leverage. Statu- tory priority claims – such as labour, social security, and certain taxes – rank above secured creditors, potentially eroding collateral value even for perfected security. Guarantees or security granted shortly before insolvency may be clawed back if deemed detrimental to creditors, thereby adding to the uncertainty. Lend- ers also face practical challenges, such as lengthy proceedings and forced-sale values, prompting them to perfect security early, monitor compliance, and include protective covenants. Project finance is central to Chile’s financing mar- ket, supporting large-scale infrastructure and energy projects with robust participation from domestic and international lenders, development banks, and mul- tilateral institutions. Renewable energy – particularly solar and wind – drives activity as Chile pursues car- bon neutrality, while mining also relies heavily on pro- ject finance for new developments, expansions, and supporting infrastructure. Infrastructure concessions, including highways and airports, reflect Chile’s estab- lished public-private partnership model. 8. Project Finance 8.1 Recent Project Finance Activity
Recently, green hydrogen and lithium projects have attracted international investment and are expected to grow in prominence. Chile’s project finance market is sophisticated, internationally aligned, and features diverse lender participation. 8.2 Public-Private Partnership Transactions Chile’s public-private partnerships operate under the Concessions Law, enabling private entities to finance, build, operate, and maintain public infrastructure through a system administered by the Ministry of Pub- lic Works. Projects are awarded via public tenders, with private concessionaires recouping investments through user fees, availability payments, or subsidies. The legal framework ensures investor protections, including step-in rights, dispute resolution, and ter- mination payments, while imposing limits on con- tract modifications and maintaining strict regulatory oversight. Despite challenges such as political scru- tiny and risk allocation complexities, the concession model remains central to Chile’s infrastructure policy and attracts significant project finance. 8.3 Governing Law Parties to project documents in Chile have significant flexibility in choosing governing law and dispute res- olution forums. Large cross-border financings often use New York or English law and international arbitra- tion (typically ICC or UNCITRAL), with Chilean courts generally recognising foreign law clauses and arbitral awards unless they are contrary to public policy. How- ever, contracts involving the state or regulated sectors like energy and mining are usually governed by Chil- ean law and may require local jurisdiction to ensure regulatory compliance and enforceability. Ultimately, project finance transactions often combine local law contracts with foreign law-governed financing agree- ments, reflecting regulatory and lender expectations. 8.4 Foreign Ownership Foreign entities can generally own real property and water rights in Chile, with the main restriction being a prohibition on ownership in border zones (within ten kilometres of the frontier) unless presidential authori- sation is granted. Mineral rights remain state property and may only be exploited via concessions or con- tracts under Chilean law. Foreign lenders may secure
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