Project Finance: Raising Money the Old‐fashioned Way

Kensinger, John W.; Martin, John D.

doi:10.1111/j.1745-6622.1988.tb00474.x

Cited by 64 publications

(29 citation statements)

References 2 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…4. For example, Shah and Thakor (1987), Kensinger and Martin (1988), John and John (1991), Chemmanur and John (1996), Brealey et al (1996) and Esty (2003a). 5.…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 98%

The term structure of credit spreads in project finance

Sorge

Gadanecz

2007

Int. J Fin Econ

View full text Add to dashboard Cite

This paper finds that the term structure of credit spreads in project finance is hump-shaped. This contrasts with other types of debt, where credit risk is shown instead to increase monotonically with maturity ceteris paribus. We emphasize a number of peculiar features of project finance structures that might underlie this finding, such as high leverage decreasing over time, long-term political risk guarantees and the sequential resolution of uncertainty along project advancement stages. Our result is particularly relevant given the importance of project finance as a source of long-term capital for infrastructure especially in developing countries and has implications for risk management in the framework of Basel II.

show abstract

“…4. For example, Shah and Thakor (1987), Kensinger and Martin (1988), John and John (1991), Chemmanur and John (1996), Brealey et al (1996) and Esty (2003a). 5.…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 98%

The term structure of credit spreads in project finance

Sorge

Gadanecz

2007

Int. J Fin Econ

View full text Add to dashboard Cite

show abstract

“…The strength of the underlying contractual relationship between Werent parties is essential. Credit support for project-finance comes in large part from the revenues associated with the power purchase agreement.3 Because most markets do not provide long-term fixed-price contracts, project-finance is most typically associated with power generation and several other specific commodities (Kensinger and Martin, 1988;Nevitt, 1983).…”

Section: Private Ownership Project-financementioning

confidence: 99%

Alternative windpower ownership structures: Financing terms and project costs

Wiser¹,

Kahn²

1996

View full text Add to dashboard Cite

“…However, they do not address issues of taxes and agency costs, nor do they contain predictions about value gains from project financing. Kensinger and Martin (1988) and Chen, Kensinger, and Martin (1989) present some interesting data on project financing and discuss several benefits of project financing, including the reduction of information costs for investors and financial flexibility for the firm. However, they do not attempt a formal study of these aspects.…”

Section: Introductionmentioning

confidence: 98%

Optimality of project financing: Theory and empirical implications in finance and accounting

John

1991

Rev Quant Finan Acc

View full text Add to dashboard Cite

Abstract. During the 1980s a fairly active market developed in the private placement of limited recourse project financing. Although this form of financing is gaining in importance, we know very little about it. This article presents a theoretical analysis of project financing. In the model of the firm presented, outstanding risky debt gives rise to agency costs of underinvestment that are offset by the benefit of debt-related tax shields. The tradeoff specifies the optimal leverage for a firm. Within this framework, we consider the optimality of financing a new project with a nonrecourse project financing arrangement. We derive implications for 1) the characteristics of a new venture that will be project financed, 2) the wealth gains from project financing over that of financing with straight debt, and 3) the optimal allocation of debt across the different assets (the sponsor firm vs. the new venture). It is shown that a project financing arrangement, where the debt is optimally allocated to the sponsor firm and the new venture, increases value by reducing agency costs and increasing the value of tax shields (compared to the case of straight debt financing). The optimal allocation of debt in project financing involves assigning to the sponsor firm and the new venture debt levels equal to their individual optimal capital structures. Several testable empirical implications in finance and accounting are developed.

show abstract

Project Finance: Raising Money the Old‐fashioned Way

Cited by 64 publications

References 2 publications

The term structure of credit spreads in project finance

The term structure of credit spreads in project finance

Alternative windpower ownership structures: Financing terms and project costs

Optimality of project financing: Theory and empirical implications in finance and accounting

Contact Info

Product

Resources

About