Project Finance in Theory and Practice: Designing, Structuring, and Financing Private and Public Projects (Academic Press Advanced Finance)

Project Finance in Theory and Practice: Designing, Structuring, and Financing Private and Public Projects (Academic Press Advanced Finance)

Stefano Gatti

Language: English

Pages: 440

ISBN: 0123736994

Format: PDF / Kindle (mobi) / ePub


Project finance is a fast-growing area of capital investment for major infrastructure and other large projects. Financing such projects as EuroDisney, airports, highways, tunnels, schools, hospitals, and other large projects presents a complex and interesting challenge that the specialty of project finance takes on wholeheartedly, combining financial engineering with legal and contractual expertise to develop various financing options. In this book, Stefano Gatti of Bocconi University describes the theory that underpins this cutting-edge industry, and then provides illustrations and examples from actual practice to illustrate that theory. At key points in the book, Gatti brings in other project finance experts who share their specialized knowledge on the legal issues and the role of advisors in project finance deals. The CDROM included with the book allows readers to generate results using an excel spreadsheet.

*Forword by William Megginson, Professor and Rainbolt Chair in Finance, Price College of Business, The University of Oklahoma

*Comprehensive coverage of theory and practice of project finance as it is practiced today in Europe and North America

*CDROM included with the book contains interactive spreadsheets so that readers can input data and run and compare various scenarios, including up to the minute treatment of the cutting-edge areas of PPPs and the new problems raised by Basel II related to credit risk measurement

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checked and approved by the pool’s agent bank. Interest due will then start to mature on the part utilized, whereas the SPV will pay the commitment fee on the unutilized part (see Section 6.3). Instead, repayments are structured based on the cash flow trend forecast in the financial plan. Each repayment reduces the SPV’s debt to the pool, and so the base facility is not a revolving credit. The two options for repayment—variable capital installments and a given percentage—are analyzed in Section

the year).15 Table 6.35 Comparison of Tenors (in Number of Years) of Samples of Syndicated Loans and Project Bonds (2004–2011) Data indicate longer tenors for project bonds until 2007. However, the recent financial crisis has shortened the maturities on project bonds due to a more careful approach to investors to this asset class, particularly after the generalized downgrade of monoline insurers. Longer tenors for project bonds are possible mostly thanks to the types of investors

defined, it can also include the political risks of doing business in a given country. covenants: Limitations placed by lenders on borrowers that the latter must respect in order to draw down the funds in question. Positive covenants oblige the project company to do certain things; vice versa, negative covenants prohibit the project company from doing others. cover ratios: Indicators of financial feasibility that make it possible to recognize the sustainability of the capital structure chosen

(generally a service provider) pays fixed periodic sums to the owner of the network (often the SPV). Another example is in the shipping industry, where we find time charter contracts (which usually run from 5 to 15 years). This tool enables ship owners to finance investment initiatives while employing a limited amount of their own financial resources. With a time charter, a third party (often a service company) pays a rental fee to the SPV, which is usually the owner of a fleet of ships, for the

VAT collected. The reason is that these funds can be earmarked for loan repayment as long as there is a VAT credit. After that, the net VAT collected is due to the VAT office. This is why, unlike the base facility, the VAT facility does not include interest expenses related to the investment it has to finance; instead, it is simply equal to the sum of the VAT disbursements.12 In this regard, see Figure 5.8. FIGURE 5.8 Logic behind the VAT facility. Due to the flexibility of the repayment

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