Cordiant backs Brazilian port expansion

The Canadian fund manager has chipped in with a $20m loan for the $117m expansion of Tecon Salvador, a container facility in Bahia. The facility, currently operating at maximum capacity, will be able to accommodate more and bigger vessels post-financing.

Cordiant Capital, the Montreal-based fund manager, has provided a $20 million loan for a $117.2 million expansion project being undertaken by Tecon Salvador, which operates the only dedicated container facility at a port terminal in Brazil’s Bahia region.

Tecon Salvador will use the financing to refurbish and double the terminal’s container handling capacity to cater for Brazil’s booming exports to Europe, the US and China. Products exported through the port include petrochemicals, rubber, tires, cellulose, fruit and auto parts.

The expansion of the facility, which is currently operating at maximum capacity, is due to complete in March 2012, when the terminal will have a handling capacity of 500,000 TEUs (20-foot equivalent units). This will make it one of Brazil’s ten largest container terminals.

“Port capacity in Brazil is completely saturated due to the country’s booming exports,” said David Creighton, president and chief executive of Cordiant Capital, in a statement. “The shortage of port handling capacity is hampering the country’s economic growth and infrastructure investments are urgently needed to remedy this.”

The volume of containers going through Brazil’s ports has been increasing rapidly with a compounded annual growth rate of more than 10 percent between 1999 and 2010.

The financing will allow Tecon Salvador to re-establish a service linking South America’s east coast with Asia via the Panama Canal. The service was suspended in 2003 when the size of ships being used became too big for the facility’s handling capacity. Now, the facility will be able to handle post-Panamax vessels, the largest modern container ships.

The lead arranger of the loan for Tecon Salvador is the International Finance Corporation (IFC), with whom Cordiant has been regularly co-investing over the last 10 years.

Cordiant manages the Infrastructure Crisis Facility Debt Pool on behalf of the IFC, which was set up to help remedy the collapse in emerging market infrastructure lending caused by the global banking crisis. The firm manages $2.2 billion in total on behalf of institutional investors globally.

*For more insights and expert commentary on the Brazilian ports sector, please click on the link (top right) to our 2011 Brazil Intelligence Report.