2-3 November 2017: and 15th meeting of the G20/OECD Task Force on Institutional Investors and Long-Term Financing
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Generally, such projects tend to be relatively large because of the time and other transaction costs involved in structuring and to include considerable capital equipment that needs long-term financing.
In recent years, private sector infrastructure projects under long-term government concession agreements with power purchase agreements (PPAs) that assure a purchaser for the project's output have been able to attract major project finance flows.
Senior debt enjoys priority in terms of repayment over all other forms of finance. Mezzanine debt is subordinated in terms of repayment to senior debt but ranks above equity both for distributions of free cash in the so-called “cash waterfall” (i.e. priority of each cash inflow and outflow in a project) and in the event of liquidation of the PPP Company. Since mezzanine debt’s repayment can be affected by poor performance of the PPP Company and bearing in mind the priority in repayment of senior debt, mezzanine debt typically commands higher returns than senior debt.
Rule 3a-7 exempts from registration issuers thatare engaged in the business of acquiring and holding "eligible assets"--whichare defined as financial assets (such as project finance loans) that bytheir terms convert into cash within a finite time period plus certainrelated rights (which would include collateral for project finance loans).
Short term finance are needed for the very first step of the business, for starting up the business and to cover the daily running cost, while the long term finance will help them to grow, to expand and to buy resources.
However, the costs of such enhancement have not precludeda substantial market from developing and this structure, by utilizing mediumterm notes together with commercial paper, may prove to be workable forsecuritization of project loans.
A project that can be structured to attract these investors—to supplement or even to substitute for bank lending—may be able to raise longer-term finance more easily.
For example, a project's construction risks (delay and/or cost overrun)are most often addressed by a lump sum guaranteed completion turnkey contractand the marketability of a project's output is usually addressed by longterm supply contracts covering the expected output of the project at aprice designed to assure that all costs of the project's production ofsuch output are covered (including a return of and on equity capital).
For developing markets, project finance holds out the hope that a well-structured, economically viable project will attract long-term financing even if the project dwarfs its sponsors' own resources or entails risks they are unable to bear alone.
Capital Markets refers to the market where the It is very important for the manager of a business to select a suitable source of finance because There are two types of financing, long term and short term to medium term financing....
The second way is for long-term investors to make a new loan in order torefinance the origination loan made to finance one project or, if applicable,the origination loans made to finance several related projects.
Financial advisers will be able to advise on the likely sources of funding for a given project. They would also be expected to make an assessment of the anticipated costs and benefits of funding options. This will include an assessment of the debt tenors (the length of time to maturity, or repayment, of debt) likely to be available from various sources. This is particularly important if long-term funding is not available for the project and where the public sector may be drawn into risks associated with the need to refinance short-term loans (so-called “mini-perm” structures).