Cash accounts, like the Debt Service Reserve Account (DSRA) or the Maintenance Reserve Account (MRA) are regularly required by banks as an additional means of security within a project finance transaction. The idea is to provide for an additional cash buffer in case either debt service or major maintenance expenses can not be funded due to short-term operating cash flow deficiencies.
Regularly, within a term sheet, the DSRA has to be funded up to an amount of 50% of the aggregate of the scheduled principal and financing costs due and payable over the next 12 months.
The MRA usually looks into the future even further, with its minimum funding requirement often defined as the aggregate of
- Months 0-12: 100% of the major maintenance costs for such forecast period
- Months 13-24: 66.67% of the major maintenance costs for such forecast period
- Months 25-36: 33.33% of the major maintenance costs for such forecast period