Infrastructure Bonds vs. Project Finance Loans


Recently, there has been a rise in the number of infrastructure bonds issued, largely as a result of the low interest rate environment, the lack of suitable (institutional) investment opportunities, lack of banking licenses of some market participants and regulatory challenges of certain banks. The below tables, on a high level, present a general overview of differences between project finance loans and infrastructure bonds.

General Overview

 Infrastructure BondsProject Finance Loans
TermShort, medium, longGenerally medium to long
Investor BaseWide base, anonymityBanks, known
ConfidentialityPublic disclosure (if applicable) Disclosure to banks only
RegulationHighly regulated (e.g. securities regulation)Less regulated
RatingsGenerally requiredUnrated
CovenantsGenerally lightExtensive
Project MonitoringPassiveActive

Transaction Parties – Infrastructure Bonds

IssuerIssue notesGlobal Note, Terms + Conditions, Subscription Agreement, Agency Agreement
GuarantorGuarantees obligations of IssuerGuarantee, Subscription Agreement
Lead ManagersSubscribe notes and place them with investorsSubscription Agreement
Paying AgentHandles issuance process and paymentsPaying Agency Agreement

Transaction Parties – Project Finance Loans

Mandated Lead ArrangerArranges the primary syndicationMandate Letter
Underwriter (Original Lender)Underwrites the facilitiesCommitment Letter
Documentation AgentNegotiates and administrates the documentationMandate Letter
BookrunnerAccepts commitments and allocates participations in the facilitiesMandate Letter
Facility AgentReceives and distributes payments and informationCredit Agreement
LendersParticipate in syndicationCredit Agreement
Security TrusteeHolds and administrates the collateral for the finance partiesSecurity Trust / Intercreditor Agreement
BorrowerBorrows the credit facilityCredit Agreement
Guarantors Grant guarantees and other securityCredit Agreement, Security Trust / Intercreditor Agreement