Safer than houses?

Banks and other equity providers have been pretty keen on the ports sector in recent years. As Ports America's newly appointed chief development officer, Nasir Khan, says, ports have offered some real attractions as long-term cash generating assets with generally limited competition and high barriers to entry because of space constraints and environmental issues.

And ports may still be safer than houses - but the reality of the credit crunch is filtering through fast.

"The dynamics of trade have obviously changed," points out Mark Lloyd Williams, a corporate finance partner at Norton Rose specialising in the shipping and ports sector. Nightmare stories from the chartering market, shipowners trying to extricate themselves from shipbuilding contracts, slowing trade from China - "all of these things are obviously putting some pressure on the underlying backdrop to trade, and obviously having an impact on a port being financed," he says.

"The current climate is, of course, creating concerns over any trade projections. I would say that even if the financing was available, then there must be questions about trade."

Mr Lloyd Williams' view is that while there is still finance available, this tends to be of a relationship nature: "I suspect you would find it hard to get anything other than the refinancing of an existing facility done terribly easily," he says.

"In infrastructure generally, people are having to put equity in and there is obviously a flight to quality projects at the moment. If you have the choice of refinancing a major infrastructure development, or financing a greenfield site, I think the risk-rewards premium on the greenfield site are not too great at the moment."

Similarly, Mr Lloyd Williams believes there will be a swing back to "established jurisdictions" from emerging markets. "The differentials in returns between the two have become so narrow, so why take the extra risk? And obviously, if there is anything hairy in a project, it doesn't get finance.

"We are basically seeing a world in which there is too much debt and therefore the banks are desperately trying to reduce their debt exposure - to the extent that if they are doing deals, they are doing them in long-term relationships.

"The drop in trade and traffic must mean concerns about traffic projections in any kind of new scheme."

What is clear, he says, is that finance will cost more. "Borrowers may have to look to different types of finance, such as the much-heralded sovereign wealth funds, or equipment financing. It is a market in which we will see lower levels of gearing, where people may have to put a significant amount of equity up front and then look to refinance in 12-18 months' time, whether through the capital markets or through proper debt financing."