Financial Advisor Reputation and the Cost of Debt: Theory and Evidence from Project Finance Loans

2017 ◽  
Author(s):  
Djerry C. Tandja M. ◽  
Gabriel J. Power ◽  
Issouf Soumarr
Keyword(s):  
Project Finance ◽  
Cost Of Debt ◽  
Financial Advisor ◽  
The Cost

Turning Around Distressed Project Finance Assets in India: What More Needs to Be Done?

2018 ◽  
Keyword(s):  
Cash Flows ◽  
Project Finance ◽  
Cost Of Debt ◽  
Risk Allocation ◽  
Debt Overhang ◽  
Balance Sheets ◽  
Infrastructure Project ◽  
Bankruptcy Code ◽  
The Cost ◽  
Future Cash Flows

With the Insolvency and Bankruptcy Code firmly in place, India’s distressed project finance assets are turning out to be attractive to institutional investors. Project finance assets need asset-and deal-specific financing solutions in order to achieve successful turnarounds. The turnaround solution must ensure optimum risk allocation and mitigation leading to the buildup of future cash flows. This will, in turn, lead to deleveraging of stressed balance sheets. The authors present a conceptual model and argue that even now the political and regulatory risks for infrastructure project loans in India have not been completely mitigated. This has resulted in a situation of a debt overhang, wherein even economically viable projects may not attract fresh funding. To address this, the article suggests the possible use of priority funding structures, where existing lenders cede charge of the assets in favor of a new lender as a way to reduce the cost of debt and unlock shareholder value. This solution will also ensure that the restructuring package is properly priced (from the project finance lender’s perspective), resulting in the efficiency and viability of the restructured asset.

scholarly journals Determinants of bank loan spread in project finance

2019 ◽  
Vol 12 (1) ◽  
pp. 161-186 ◽  
Author(s):  
Wouter Thierie ◽  
Lieven De Moor
Keyword(s):  
Bank Lending ◽  
Policy Implications ◽  
Bank Loan ◽  
Economic Environment ◽  
Project Finance ◽  
Cost Of Debt ◽  
Infrastructure Projects ◽  
Content Type ◽  
Pricing Decisions ◽  
The Cost

Purpose The purpose of this paper is to develop a better understanding of the pricing decisions of banks for project finance (PF) loans and the main drivers affecting the cost of debt in infrastructure deals. As infrastructure projects are typically highly leveraged, the cost of bank lending is an important driver of the overall funding costs for the project. Design/methodology/approach First, the paper provides a general review of the drivers of the cost of funds in PF. Second, the paper develops a regression analysis of the loan’s spread on four categories: project, loan, bank characteristics and the economic environment. By using a new data set of InfraDeals containing data on bank spreads of more than 700 infrastructure projects worldwide from 2006 to 2016. Findings The results show that the cost of debt is predominantly affected by the market and the business cycle, rather than the structuring of the project. This implicates that the timing when the deal is closed weighs more heavily than the specificities of the project itself. Practical implications The results have important policy implications. As PF deals are often paid for by taxpayers, this paper could help policymakers to use public funds for infrastructure in the most efficient way. Originality/value One weakness of existing studies in PF loan pricing is that they undervalue the role of the economic environment in the cost of debt. Few studies in the literature include macroeconomic control variables in their model and the others do not seem to find significant results. This paper reveals new insights on the pricing decisions of banks for PF loans.

How Sensitive to Fundamentals is the Cost of Debt? Evidence from Commodities Boom and Bust

2016 ◽  
Author(s):  
Pablo Donders ◽  
Mauricio Jara-Bertin ◽  
Rodrigo Andres Wagner
Keyword(s):  
Cost Of Debt ◽  
Boom And Bust ◽  
The Cost
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