RT Journal Article
SR Electronic
T1 Project Finance with Limited Recourse
JF The Journal of Structured Finance
FD Institutional Investor Journals
SP 97
OP 104
DO 10.3905/jsf.2007.698660
VO 13
IS 3
A1 Michel Gendron
A1 Van Son Lai
A1 Issouf Soumaré
YR 2007
UL https://pm-research.com/content/13/3/97.abstract
AB Project finance has become an important method for financing large-scale, capital-intensive projects, such as power plants, oil pipelines, roads, tunnels, etc. We analyze debt capacity and risk choice in a project finance arrangement where the project's lenders have limited recourse to the sponsoring company's assets. We draw a parallel between vulnerable financial guarantee loans and project finance loans with limited recourse. Using contingent claims analysis, we illustrate the trade-offs between risk and debt capacity in those cases where the project's lenders have recourse to the sponsor's assets and in those where they do not.TOPICS: Credit risk management, project finance, volatility measures