PERU Trends and Developments Contributed by: Andrés Kuan-Veng and Luis Ernesto Marín, Rubio Leguía Normand
Securitisation for financing public infrastructure projects
Finally, the structure also enabled the MML to issue bonds denominated in local currency ( soles ), while still allowing access to a much larger universe of investors by being an interna - tionally placed bond. The use of a securitisation trust offers several advantages: • it ensures that the resources transferred to the securitisation trust for the issuance of securities (property transfer tax and vehicle tax) are “isolated” within a purpose-specific vehicle, designated exclusively to secure the payment of the securities issued by the secu - ritisation trust, without being subject to diver - sion or repurposing by this or other municipal administrations; • it is managed by a professional administrator (a securitisation company), which is also a supervised entity (and chartered by the Peru - vian securities regulator), providing security and transparency in its operations; • it allows for the diversification of financing sources, reducing dependence on traditional bank loans or central government transfers (a particularly useful feature in the context of budgetary constraints); and • it enables access to immediate financing, allowing for upfront monetisation of future revenue streams. Lastly, this type of structure is attractive to insti - tutional investors (such as insurers, pension funds, etc), which are often highly interested in asset-backed instruments that can offer stable returns and maturities aligned with their long- term investment needs. The experience gained from this transaction demonstrates the potential of an asset securiti - sation structure for local governments or other
While not a novel use, securitisation has long been employed to finance infrastructure pro - jects, particularly co-financed public-private partnerships. In recent months, local govern - ments have used securitisation to obtain fund - ing for infrastructure projects. In addition, recent legislation has permitted public entities to par - ticipate in securitisation processes to finance transportation and urban mobility infrastructure. Securitisation trust of the Metropolitan Municipality of Lima (MML) In December 2023, the MML conducted an innovative asset securitisation operation. This transaction involved a securitisation trust estab - lished by the MML, which issued an initial private placement of securitisation bonds for PEN1.205 billion over a 20-year term, as part of a bond issuance programme with a cap amount of PEN4 billion. This first issuance aimed to finance 42 infrastructure and public service projects in Lima and to repay existing debt. In September 2024, a “reopening” (amendment of the first bond issuance) allowed the securiti - sation trust to issue an additional PEN1.25 billion in the capital markets, specifically to finance nine infrastructure and public service projects. This issuance sets a milestone in the Peruvian capital market as the largest issuance in local currency in 2023 and the first time a Peruvian local government issued securitisation bonds internationally using an asset securitisation structure. Because the bonds were issued by the trust and not directly by the MML, the debt does not qualify as external indebtedness under applicable budget rules for local governments.
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