Financial tests, such as the Debt Service Coverage Ratio (DSCR) test not only is used within credit documentation as a warning mechanism to determine and monitor the project performance and the likelihood for debt repayment. It also is a key metric in order to control and restrict dividends and other distributions to project sponsors. Further, […]
A prerequisite for understanding and making business decisions is to understand its financial consequences. For a proper understanding it is necessary to consider alternative options, to analyse various scenarios of key input variables and to perform sensitivity analyses of output data to changes in input data. Financial models are used to explore all such aspects […]
Next to the DSCR, two further key financial ratios are commonly used and tested in project finance transactions, i.e. the Loan Life Cover Ratio (LLCR) and the Project Life Cover Ratio (PLCR). Both ratios are regularily calculated as the ratio of A to B, whereas A = The net present value of the Available Cash […]
Financial models are the most integral part of any infrastructure finance transaction. For example, in many infrastructure transactions, the maximum debt amounts will be subject to adjustments which reflect the final sizing of a borrower’s debt requirements on the basis of a final financial model run reflecting updates of the underling base rate setting. As […]
In cash-flow based project finance transactions, it is customary that banks require distributions to sponsors to be limited or subjected to certain tests. As such, cash distributions will regularly be permitted only if no event of default or potential event of default has occurred, is continuing or would occur as a result of a distribution […]