Project Finance

Question 1

Credit Facilities

Answer 1

• business/corporate finance loan
• allows business to borrow money over extended amount of time; avoid reapplying each time loan is needed
• a company take out an umbrella loan for generating capital over an extended period of time

Question 2

Amortization

Answer 2

• accounting technique used to periodically lower the book value of a loan or an intangible asset over a set period of time
• focuses on spreading out loan payments over time
• • amortization schedules are used by lenders, such as financial institutions, to present a loan repayment schedule based on a specific maturity date (repayment date)

Question 3

Lead Arranger

Answer 3

• an investment bank/underwriter firm that facilitates and leads a group of investors in a syndicated loan for major financing

Question 4

Syndicated loan

Answer 4

• financing offered by a group of lenders who work together to provide funds to a single borrower
• loan can be a fixed amount of funds, a credit line, or a combo of the two
• interest fixed or floating

Question 5

Underwriter Firm

Answer 5

• an investment bank, that buys an issue of securities from a company and resells it to investors

Question 6

Securities

Answer 6

• refers to a fungible, negotiable financial instrument that holds some type of monetary value, it represents:
• an ownership position in a publicly-traded corporation via stock
• • creditor relationship with a governmental body or a corporation represented by owning that entity’s bond
• or rights to ownership as represented by an option

Question 7

Fungibility

Answer 7

• ability of a good or asset to be interchanged with other individual goods or assets of the same type
• implies equal value between assets

Question 8

Issue

Answer 8

• process of offering securities in order to raise funds from investors
• companies may issue bonds or stocks to investors as a method of financing the business
• also refers to a series of stocks or bonds that have been offered to the public and typically relates to the set of instruments that were released under one offering
• appetite influenced by ability to actually make the payments.

Question 9

Surety /Surety Bond

Answer 9

• a person or party that takes responsibility for the debt, default or other financial responsibilities of another party.
• that organization assumes the responsibility of paying the debt in case the debtor policy defaults or is unable to make the payments (AKA guarantor)
• • Surety bonds are financial instruments that tie the principal, the obligee—often a government entity—and the surety.
• this provides a line of credit to the principal to reassure the obligee (lendor) that the principal will be fulfilled

Question 10

Principal

Answer 10

• the original sum of money borrowed in a loan or put into an investment
• principal is the original sum committed to the purchase of assets—independent of any earnings or interest.
• principals are those who own a majority stake in a company and/or play a significant role in running it

Question 11

Back-Leveraged

Answer 11

• generally refers to debt financing which is provided by lenders to a holding company that owns a controlling interest in a tax equity partnership
• this tax equity partnership, in turn, owns the project company which owns and operates the asset.

Question 12

Sovereign Ceiling

Answer 12

The highest rating that a bond can have is generally dictated by the country rating where the issuer is situated. The rating of the country is known as the sovereign ceiling as a result