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Structured and Project Finance

Overview: Structured

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Structured and Project Finance

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    1. Structured and Project Finance

    2. Overview: Structured & Project Finance Introduction: Overview of Ex-Im Bank Structured Finance Products History and Activity Project v. Structured Finance: Distinctions Deal Appropriateness

    3. Products – What We Do Comprehensive guarantee Direct Loan Political risk only guarantee Role is as Senior Lender Participation limited by U.S. content

    4. History: Where We’ve Been

    5. Activity: What We’ve Done

    6. Authorizations By Sector, Project and Structured Finance, 1995-2004 ($MM)

    7. Authorizations By Sector, Project and Structured Finance, 1995-2004 ($MM)

    8. Structured & Project Finance: What is the Difference? Structured (Typical) Full recourse to sponsor Expansion of operation in existence for 3+years Analysis of historic & projected cash flows Limited “perfection of security” Project Finance Limited recourse Greenfield or project expansion Analyze project’s future cash flows Complex documentation to perfect security

    9. Terms: Project v. Structured Finance Structured Finance Pay interest during construction (IDC) Maximum Repayment Term 10 years/12 years power Equal semi-annual principal 1st principal 6 months post-completion Finance for: local costs connected to export contract, ancillary fees Project Finance Capitalize IDC Repayment up to 14 years Flexible amortization Grace periods available Local costs 15% of contract value, special ancillary services

    10. Deal Appropriateness-Structured v. Project Finance The Trade-off What Not to Do Issues Structure and Core Principles Co-finance Example

    11. Project Finance: Trade-off Whether to use project finance is often a trade-off between:

    12. Other Considerations For Project Finance: Expertise For Structured Finance: Existing credit source For either: Existence of more than an idea and a site

    13. What Not to Do Don’t: Use project finance due to lack of supporting balance sheet strength. Assume “micro project finance” takes as long as big deals – it takes more! Use structured finance to get lower credit standards.

    15. Core Concepts of Project Finance Reasonable Assurance of Repayment Equity at Risk Long-term investors “Real” cash equity investments Proper incentives Sound Regulatory & Legal Framework Non-interference & lenders’ rights Government support Clear regulation and transparent, enforceable contracts

    16. Structured Finance: Structure Degree of structuring can vary Elements tend to include: Reserve & other accounts Payment priorities & cash control Funding tied to milestones Dividend release conditions

    17. Example Structure Finance: Off-shore Trust

    18. Structure Finance Core Principles Same as for project finance: Reasonable Assurance of Repayment Equity at risk Sound Regulatory & Legal Framework Structured finance can save money & time, but not at the expense of credit principles.

    19. Co-Finance Reinsurance of lead ECA by follower Used mostly for straight-forward credits Not suited for project finance Too complex for “passive” following Little cost savings Use in structured finance being considered.

    20. Examples: Project Finance in Africa

    21. Examples: Project Finance in Africa

    22. Conclusions Structured finance increasingly an option, especially for small deals African activity has been less than hoped Project finance requires equity support & expertise Structured finance can save time & money but not at expense of credit Ex-Im Bank committed to being flexible in finding deal-specific approaches

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