chapter  9
12 Pages

Project Bonds in Project Finance

ByJean-Pierre Boudrias, Rebecca Kotkin, Credit Suisse

Reserve based lending (RBL) refers to an asset based financing technique that is unique to the oil and gas sector. It is secured lending where the collateral is the revenue stream that the borrower has from oil exploitation contracts. RBL structures are provided by international commercial banks, regional commercial banks and multilateral institutions particularly the International Finance Corporation (IFC). Regional banks can be very effective in their local markets and multilateral institutions bring capacity in underdeveloped markets that would otherwise not attract commercial bank funding. RBL structures take account of the fact that effective direct security over concessions is not possible and they are tailored to the specific requirements of a transaction. Lenders are advancing loans based on the present value of net expected income from exploitation concessions. The transaction is sized according to the capacity of the borrowing base assets to support the proposed debt.