Project Financing
How to structure and finance a successful transaction
- Project financing is an approach to creating and financing complex projects with high initial financial requirements and the sharing of risks among the various subjects involved.
- Project financing is part of the wider range of structured finance transactions. In such transactions, the financing is based on a clearly defined project, separate from subjects that set the transaction into action, capable of independently repaying capital and interests.
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One essential aspect is the creation of an ad hoc Special Purpose Vehicle (SPV) as a holder of all rights and obligations arising from the creation of a certain investment project. The SPV is therefore legally distinct and separate from the companies involved. The structuring of a project financing transaction cannot be done without:
- Individuation of key actors involved and definition of project milestones;
- risk management and bargaining structure;
- operational and financial sustainability.
- Funding for the transaction is issued based on the project's capacity to repay operating costs and the debt service through the cash flows generated by the project.
| Some areas of intervention | Advantages |
|---|---|
| Major works (highways, railways, infrastructures, etc.) | A group of players with different skills, different roles and resources are assigned in a complex project. Their combination enables projects that would otherwise be out of reach for either party when acting separately. |
| Hospitals | |
| Nursing homes | |
| Parking lots | |
| Sports facilities | |
| Restoration of historical buildings and abandoned urban areas | Risk sharing among the various parties involved in the transaction. |
| Waste treatment plants | |
| Power plants |
- FBS Corporate has developed specific expertise in the area of project financing, particularly for infrastructures and the real estate industry.
Some projects completed or underway
| Parking lots | Multimedia museums |
| Nursing homes | General aviation airports |
| Swimming Pools | Shopping malls |
| Restoration of historical buildings | |
| Waste treatment plants |
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The services offered consist in planning the entire structure, under the corporate, tax, legal, contractual and financial planning aspects of the transaction by:
- defining an objective financial structure;
- preparing the business plan for the SPV;
- calculating cash flows and the return for shareholders of the special purpose vehicle;
- risk analysis and sensitivity of the results;
- assisting with the negotiation of more relevant contracts;
- preparing a prospectus;
- selecting a panel of lenders and managers involved in the operation;
- raising financial resources to support the transaction and negotiating credit terms.