Project Finance in Theory and Practice, 2nd Edition

Chapter 8

Credit Risk in Project Finance Transactions^∗

Introduction

This chapter analyzes the problem of measuring credit risk in a project finance transaction from the lenders’ viewpoint. As seen in previous chapters, a number of specificities are inherent to structured financing as compared to corporate financing. These features have as much to do with how the financing is structured as with the assessments creditors make in ascertaining the financial sustainability of a given transaction.

These unique traits are also reflected in a regulatory context. In fact, the Basel Committee position is that the family of structured transactions, or specialized lending (SL), is characterized by a series of specific features that suggest that such deals ...