Your SlideShare is downloading. ×
0
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Global Banking and Capital Markets
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Global Banking and Capital Markets

426

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
426
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
18
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Global Banking and Capital Markets Loan Syndication and Project Finance Prof. Ingo Walter
  • 2. Financing alternatives available to major Euro- zone corporations Subsidized funds Fixed Euro Project finance Term Loan Interest rate swap Bank debt Revolving facilites Currency swap Real estate Long Private Leasing term DEBT placement Asset backed Unsecured E-zone Floating Non-Euro Eurobond Public offering MTN FRN VRN US CP Short Straight ARP Hybrid term Euro CP Callable Stripped Index-linked Unstripped EQUITY Bank debt Convertible Private With warrants Private Full rights Domestic Public offering Restricted International
  • 3. Firm Continuum and sources of capital Firm Size Information Availability Small firm, possibly Medium-sized firms. Very small firm, possibly with high growth Some track record. Large firms of with no collateral potential but often Collateral available, known risk and and no track record. with limit track record. if necessary track record. Sources of Capital Insider Seed Money Commercial Paper Short-Term Commercial Loans Intermediate-Term Commercial Loans Medium Term Mezzanine Notes Fund Financing Private Placement Public Debt Venture Capital Public Equity
  • 4. What form of financing? Match needs and motivations to available sources Permanent or Is availability No Commercial paper or Flexible Flexible insurance needed? Short term bank debt Yes Permanent Bank credit facility Frequent Yes Medium term notes Borrower? No Small Size? Private placement Large Yes Credit Problems? Term loan No Yes Tax Problems? Leasing No Asset backed Capital availability Yes financing Problems? Project finance No Disclosure Yes Eurobond Problems? Domestic or foreign No bond
  • 5. Bank Loan Origination Borrower- Credit Borrower- Bank Bank Bank Funding Search Analysis Negotiation Typically through Bank conducts Terms Bank funds loan referrals loan evaluation negotiated
  • 6. Revolving Credit Facilities: Illustrations
  • 7. Top 20 Arrangers of Syndicated Loans1 1997-99 (US$ million) Pos. Bank Amount No. % Share 1 Chase Manhattan Corp. 755,416.4 2,535 21 2 Bank America Corp. 683,733.4 3,462 19 3 Citigroup Inc. 447,172.4 1,567 13 4 JP Morgan & Co. 312,773.3 708 10 5 Deustche Bank AG 229,355.5 1,128 6 6 Barclays 127,105.6 559 4 7 ABN AMRO Bank NV 115,780.7 846 3 8 Fleet Boston Financial 114,127.7 1,173 3 9 Credit Suisse First Boston 99,843.6 373 3 10 UBS Warburg 90,089.3 297 3 11 Bank of New York 88,362.9 399 2 12 First Union Corp. 85,520.2 800 2 13 Scotia Capital 61,343.1 360 2 14 HSBC 60,598.3 341 2 15 Goldman Sachs & Co. 53,883.3 165 2 16 Greenwich Natwest 47,712.8 196 1 17 Banque National de Paris 47,465.4 283 1 18 Societe Generale 47,384.4 443 1 19 Toronto Dominion Bank 47,063.1 213 1 20 Dresdner Bank 41,722.3 216 1 Total 3,556,454 16,064 100 1Euromarket, Asiamarket and U.S. Market combined Sourc: Euromoney Publications PLC.
  • 8. Syndicated Loans
  • 9. Project Finance The arrangement of debt, equity and credit enhancement for the construction or refinancing of a specific facility/ plant in a capital intensive industry; Financiers must based their credit appraisals on the merits of the project and projected revenues from the operations of the facility;a nd Financiers must rely on the assets of the facility (including its revenue producing contracts and cash flow) as collateral.
  • 10. Industrial Distribution of Project Finance and All Syndicated Loans Project Finance Loans Project Finance Loans Industrial Category # of Loans Total Value of Percent of # of Loans Total Value of Percent of of Borrower Amount Loans US$ Million Total Value Amount Loans US$ Million Total Value Commerical & Industrial 3,136 386,862 61.0 59,612 8,391,648 63.1 Chemicals, Plastic & Rubber 105 8,891 1.4 2,340 321,100 2.4 Communications 241 51,126 8.1 2,237 510,242 3.8 Construction/ Heavy Engineer 222 15,477 2.4 1,434 75,751 0.6 Forest Productions/ Packaging 135 15,219 2.4 1,988 299,979 2.3 Hotels & Leisure 298 20,628 3.3 1,992 255,184 1.9 Mining & Natural Resources 300 28,030 4.4 1,452 191,219 1.4 Motorway Operator 117 14,642 2.3 342 28,636 0.2 Oil & Gas 631 119,513 18.8 6,061 1,165,320 8.8 Petrochemicals 147 24,975 3.9 470 89,359 3.9 Steel & Aluminium 215 23,488 3.7 2,098 199,275 3.7 Utilities 1,063 140,609 22.2 4,644 808,306 22.2 Electrical/ Energy Utility 1,009 136,520 21.5 3,942 714,073 21.5 Financial Institutions 167 21,828 3.4 14,051 2,461,411 3.4 Transportation 143 48,677 7.7 5,781 711,028 7.7 Transport (ex. Airlines, Ship) 112 46,788 7.4 1,870 319,180 7.4 Government/ Agencies 399 30,602 4.8 3,979 674,869 4.8 Government/ Authority 302 23,333 3.7 2,463 488,359 3.7 Other 48 5,844 0.9 2,716 251,211 0.9 Total, All Items 4,956 634,422 100.0 90,783 13,298,473 102.1
  • 11. Financial Details of the Fifteen Largest Project Finance Deals Since 1980
  • 12. Project Finance Relationships c) a) c) e) c) e) Agent Contractor Suppliers (Bank) Structuring Contract Buy-Back Turn-Key Supply-or-Pay Contract Contract Sponsor Equity Equity/ Quasi Equity a) c) c) e) Profit O&M Fee Project Agreement Operator c) e) Govt. Guarantees Insurance Co. Derivatives & L/cs BOT Debt-Service Loans Take-and-Pay State Agreement Contract Guarantee Guarantees c) e) (Supra-) Lender: National Co-Financing Bank & Inst. Customer Institutes Investors d) f) d) e) a) Sponsor b) Project Dual-Tranche-Financing c) Contractor d) Lender e) Guarantor f) Operator
  • 13. Maui Gas Field, New Zealand A) Contract covering design, construction and operation of offshore production and onshore treatment facilities B) Contract covering onshore and offshore engineering services/ consulting C) Contract covering construction of offshore gas transmission system D) Contract covering construction of onshore gas transmission system
  • 14. BOT Concept From Government perspective To provide competitively priced infrastructure (power, tunnels, telecoms). To develop infrastructure off balance sheet. From Lender/ Investors perspective Invest in long-term stable cashflow. Receive and adequate return.
  • 15. Possible Sources of Debt Export Credit Agencies Mutilaterals/ Bilaterals Commerce Banks Capital Markets
  • 16. Export Credit Agencies Traditional providers of concessional financing for equipment sales US: US EXIM Germany: HERMES UK: ECGD Japan: J-EXIM OECD Guidelines: 85% of Country Specific Costs 15% of Local Content and 15% of Local Costs Growing flexibility towards project finance
  • 17. Multilaterals/ Bilaterals IFC, World Bank, ADB, EBRD OPIC, CDC, OECF Catalyst for mobilizing finance Can provide debt, equity and cofinancing Generally flexible on tenor and will do project financing
  • 18. Commercial Banks Traditional providers of limited recourse financing Recently more aggressive on accepting political risk Political risk can be isolated through: offshore guarantees escrow accounts political risk insurance
  • 19. Capital Markets Appetite of US capital markets for infrastructure projects 144A market Private placements Offer longer tenors which improve project economics More flexible on political risk
  • 20. Comparison of Cash Flows $25 Best Case Cash Flow 20 Expected Case Cash Flow Expected Life of Project 15 Worst Case Cash Flow 10 5 Debt Service 0 0 5 10 15 20 Years
  • 21. Sample Project Risks Risk Allocation Mitigation 1 Compleiton Delay Turnkey Contractor - Contingency for owner-caused - Financially strong contractor - Insurance 2 Cost Overrun Turnkey Contractor - Good Design/ Well-defined Sco - Contingency for owner-caused - Sound EPC Contract 3 Output Shortfall Owner - Solid Base Case Economics - Reserve Accounts - Insurance 4 Offtake Shortfall Utility - Capacity Payments - Minimum Take 5 Currency Fluctuations Utility - Denomination of power sales in currency of Contractual Obligat 6 Increased Interest Rate Owner - Interest Rate Swaps - Continency funds - Bond Issues 7 Erosion of Project Economics Owner - Experienced developer during development phase & allowance for margin of error 8 Political Risk All - Insurance - Self Insurance - Off-shore Arbitration
  • 22. Principles of Risk Allocation First Principle Risk can be transferred, not eliminated Second Principle Assumption of risk is to be balanced by rewards Third Principle Allocate risk to the party best positioned to manage and mitigate the risk

×