MIT1_201JF08_lec21

MIT1_201JF08_lec21 - Project Finance 2 Structure...

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Unformatted text preview: Project Finance 2 Structure Definitions Effects of subordination Innovations Debt financing Transportation Project Finance – 3 Credit Assistance Other Additional Topics in Project Finance Jon Bottom Steer Davies Gleave 18 November 2008 1 / 14 Outline Project Financing Structure Definitions Effects of subordination Innovative Financing Methods Debt financing Credit Assistance Other Project Finance 2 Structure Definitions Effects of subordination Innovations Debt financing Credit Assistance Other 2 / 14 Outline Project Financing Structure Definitions Effects of subordination Innovative Financing Methods Debt financing Credit Assistance Other Project Finance 2 Structure Definitions Effects of subordination Innovations Debt financing Credit Assistance Other 3 / 14 Project Financing Structure Equity Debt Senior Junior (Subordinate) Mezzanine Project Finance 2 Structure Definitions Effects of subordination Innovations Debt financing Credit Assistance Other 4 / 14 Effects of subordination – 1 Senior lien debt has a higher payment priority than subordinate debt Debt can be structured into tranches to take advantage of this Suppose $100 is available for debt service, and debt service is $90 Debt service coverage ratio (DSCR) is 100/90 = 1.11 – not very good Project Finance 2 Structure Definitions Effects of subordination Innovations Debt financing Credit Assistance Other 5 / 14 Effects of subordination – 2 Divide $90 debt into a $75 senior tranche and $15 junior tranche DSCR of senior lien debt is 100/75 = 1.33 – much better!...
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This note was uploaded on 12/04/2011 for the course ESD 1.210j taught by Professor Mosheben-akiva during the Fall '08 term at MIT.

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MIT1_201JF08_lec21 - Project Finance 2 Structure...

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