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Project Finance

Project Finance

Product Introduction

Project Finance has the following characteristics:

  1. 1、Project finance loans are usually used for the construction and operation of one or a set of large projects (including construction projects, reconstruction projects, expansion projects, and projects that are already in operation), or refinancing existing loans. Specific projects generally include infrastructure and energy projects.

  2. 2、The borrower is usually a SPV especially established for the construction, management and operation of the project. The existing and future assets of the borrower and its associated subsidiaries are generally used as collateral for the loans. The project sponsor/shareholder is generally one or several funds with relevant operating and investment experience, or other corporations in the relevant industry/field.

  3. 3、The source of the repayment fund is mainly from contracted sales, subsidy or other income generated by the project, and funds obtained from refinancing.

  4. 4、Projects are generally financed by syndication loans.

Product Advantages

  1. 1、 Project finance is a type of non-recourse lending based on expected cash flows in the future. This type of financing does not require parental guarantee from the project sponsor, reducing the overall leverage of the sponsor as compared to recourse lending.

  2. 2、  When the duration of the contracted cash flows are fairly long, project finance could provide matching long tenor. This long tenor will not only cover construction and operation phases, but will also help project sponsors to lock in long-term financing rate, and reduce refinancing risks.

  3. 3、Project finance replies on heavy and in-depth due diligence, and put emphases on contractual analysis, cash flow projection and collateral evaluation. Project financiers are great at structuring highly projective financing terms, which will help the sponsor and the bank to mitigate various risks.

Target Customers and Conditions

  1. 1、 The applicant is a SPV especially established for the project construction and operation. Its holding subsidiaries and major shareholders shall have sound creditworthiness and robust funding capability with no major adverse records.

  2. 2、  The borrower should have relevant experience and track record in project development and operation.

  3. 3、Generally used for large-scale projects, such as power plants, core infrastructure, toll roads, bridges, tunnels, railways, airports, urban water supply and sewage treatment plants, and other construction and operation projects with large-scale upfront investments and long-term stable expected cash flows.

  4. 4、Other requirements set by China Merchants Bank New York Branch.

Business Procedures

  1. 1、Business application. The borrower shall apply for project financing from the bank, provide relevant materials according to the general requirements of credit line, and provide a project feasibility report issued by an independent engineer, market consultant report, and relevant contractual documents. If relevant reports/documentation are not completed, the applicant should provide the progress statement instead.

  2. 2、Due Diligence. The borrower, leading bank and agent bank shall cooperate with China Merchants Bank New York Branch to conduct a thorough due diligence.

  3. 3、Credit screening and approval. China Merchants Bank New York Branch shall screen and approve the loan according to its credit line approval process, and provide approval opinions concerning the loan structure, covenants and conditions.

  4. 4、Contract signing.

  5. 5、Funding of the loan and payment.

  6. 6、Post-loan management.

  7. 7、Loan repayment.