Limited-recourse project finance permits creditors and investors some recourse to the sponsors

Limited-recourse project finance permits creditors and investors some recourse to the sponsors

Nonrecourse project finance is an arrangement under which investors and creditors financing the project do not have any direct recourse to the sponsors, as might traditionally be expected (for example, through loan guarantees)

Before it can attract financing, then, the project must be carefully structured and provide comfort to its financiers that it is economically, technically, and environmentally feasible, and that it is capable of servicing debt and generating financial returns commensurate with its risk profile.

This frequently takes the form of a precompletion guarantee during a project’s construction period, or other assurances of some form of support for the project. Creditors and investors, however, still look to the success of the project as their primary source of repayment. In most developing market projects and in other projects with significant construction risk, project finance is generally of the limited-recourse type.

Difference from corporate lending. Traditional finance is corporate finance, where the primary source of repayment for investors and creditors is the sponsoring company, backed by its entire balance sheet, not the project alone. Pokračovat ve čtení „Limited-recourse project finance permits creditors and investors some recourse to the sponsors“