Project Finance – A Banker’s Reflections
Commercial banks had provided financing for large scale infrastructure projects financed in non-recourse private markets. The project bond market was born. Rating agencies have provided specific guidelines for projects to achieve investment grade ratings. Project bonds are almost exclusively issued via the 144A and private placement markets. Buyers of Rule 144A securities must be Qualified Institutional Buyers (QIBs) with more than US$100m in securities. Foreign buyers may purchase the offering under Regulation S if the offering is conducted in a global format. Large asset managers have become increasingly involved in the project finance capital markets in recent years given natural fit vis--vis many of these QIBs investment philosophies and reach for additional yield-bearing projects. Recovery Analysis dependent upon a number of factors for project finance defaults like those in corporate defaults, including the initial quality of the assets, geography and local jurisdiction governing the recovery process.