Professional Documents
Culture Documents
Project Financing/1
Asset-Backed Securities
Project Financing
Prof. Ian Giddy
Stern School of Business New York University
Asset-Backed and Project Financing Collateralized debt l Securitized loans l Non-recourse project debt l Basic question: Why should a company segregate the cash flows from a particular business, and make it selffinancing?
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Project Financing 3
Giddy/ABS
Project Financing/2
Project Financing Stand-alone, non-recourse, multi-stake, "production payment financing" l Structure? l Participants? l Funding sources? l Risks?
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Project Financing 5
Stand-alone, non-recourse "production payment financing" Sponsor's vehicle company structures multi-stake finance Sources: govt development financing, IBRD/IFC, sponsor loans, supplier credits, customer credits, institutional investors, banks, lease financing, equity Risks: resource quantity, input costs, technical, timing, pre-completion, demand, operating, force majeure, political Risk sharing and mitigation
Project Financing 6
Giddy/ABS
Project Financing/3
Financing Sources
Banks, Institutional Investors, Leasing Companies
Sponsor
n Loans n Equity
Stakeholder credits
n Suppliers n Purchasers
Project Financing 10
Project Financing
Definition
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Steps
Project Identification & Resource Allocation Risk Allocation & Project Structuring Bidding & Mandating Contracts Due Diligence & Documentation Execution & Monitoring Construction Monitoring Term Loan Conversion & Ongoing Monitoring
Project Financing 12
Lending to a single purpose entity for the acquisition and /or construction of a revenuegenerating asset with limited or no recourse to the sponser Repayment of the loan is solely from the revenues generated from operation of the asset owned by the entity Security for the loan u the revenue generating asset u all shares and interests in the entity u real property u all contacts, permits u authorizations, etc.; and, u all other instruments necessary for continuing project operations
Giddy/ABS
Project Financing/4
Limitation of Equity Investment to Projects Economic Requirement Enhanced Returns l Risk Sharing and Diversification l Accounting Treatment Preserves Corporate Borrowing Capacity l Access to Long Term Financing l Tax Benefits l Political Risk Mitigation
Project Financing 13
The Risks Political l Resource & input l Technical l Construction l Legal l Economic
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n n n
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Giddy/ABS
Project Financing/5
Technical
Construction Delays Overruns Repairability Legal Economic Access to control in default Fire, injury, etc liability Price competition Rail links
Use top experts Performance bonds Security interests Default defn Market studies
Project Financing 15
Sample Structure
Sponsors / Shareholders SINGLE PURPOSE PROJECT COMPANY Equipment Supplier Contractor Feed Stock (e.g., fuel) Supplier Operator
Copyright 1996 Ian H. Giddy
Arranging Bank
Syndicate Banks
Purchaser
Currency and Interest Rate Hedge Providers Multilaterals and EDAs Legal Counsel Technical Consultants
Project Financing 16
Giddy/ABS
Project Financing/6
Asset-Backed and Project Financing Collateralized debt l Securitized loans l Non-recourse project debt -- future payments rather than assets are the collateral in the SPV l Basic question: When is an asset worth more to investors outside the company than inside it?
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Copyright 1996 Ian H. Giddy
Project Financing 18
Case Studies Ras Laffan Qatar/Korea l YPF Argentina/Oil Trading Corp l West Java Power Project
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Questions:
u Who
is the issuer? u What assets does it have? u What are the risks, and how are they handled?
Copyright 1996 Ian H. Giddy
Project Financing 19
Giddy/ABS
Project Financing/7
Ras Laffan
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Laffan LNG Co. Ltd. (Qatar) u But Security Trustee (IBJ) plays unusually major role
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gas reserves; u LNG take-or-pay Sale and Purchase Agreement with Korea Gas; u Security Trust Agreement; Project Coordination Agreement; loan refund agreement, etc.
Copyright 1996 Ian H. Giddy
Project Financing 20
Ras Laffan
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interference u Qatar legal system u Default on Agreements u Completion/timing u Operating u Economic (LNG market)
Project Financing 21
Giddy/ABS
Project Financing/8
Project Financing 22
Contract payments
Residual payments
Ras Laffan
Giddy/ABS
Project Financing/9
Trading Corp, Cayman Is. SPV oil, just purchase and sale agreements
Project Financing 24
Sales agreement
Oil Trading Co. Cayman Islands
Notes
Investors
Trust
Project Financing 25
Giddy/ABS
Project Financing/10
SPV
to Dayalistrik Pratama
Project Financing 26
West Java Project Financing Project stage: l Uncompleted coal-fired power plant, generating power l Has multi-year power purchase agreeement with utility l Currently has bank financing l Sponsors seeking to extend financing and reduce cost by tapping the debt securities market
Copyright 1996 Ian H. Giddy
Project Financing 27
Giddy/ABS
Project Financing/11
l Sponsor
Project Financing 28
SPV
US$ Interest and principal on bonds
Investors
Project Financing 29
Giddy/ABS
Project Financing/12
Summary Collateralized debt l Securitized loans l Non-recourse project debt l Basic question: Why should a company segregate the cash flows from a particular business, and make it selffinancing?
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Project Financing 30
Other Future Flow Securitizations Credit card voucher receivables l Remittance receivables l Export receivables l Airline ticket receivables l Net international telephone settlement receivables
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Project Financing 31
Giddy/ABS
Project Financing/13
Ian H. Giddy
Stern School of Business New York University 44 West 4th Street, New York, NY 10012, USA Tel 212-998-0332 ian.giddy@nyu.edu http://giddy.org
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