Institutional investors are usually risk-averse, preferring projects with an independent credit rating

Institutional investors are usually risk-averse, preferring projects with an independent credit rating

Commercial Loans. Funds lent primarily by commercial banks and other financial institutions, generally securitized by the project’s underlying assets. Lenders seek (1) projected cash flows that can finance debt repayment with a safety margin; (2) enough of an equity stake from sponsors to demonstrate commitment; (3) limited recourse to sponsors in the event of specified problems, such as cost overruns; and (4) covenants to ensure approved usage of funds and management of the projects.

Equity. Long-term capital provided in exchange for shares, representing part ownership of the company. Provided primarily by sponsors and minority investors. Equity holders receive dividends and capital gains (or losses), which are based on net profits. Equity holders take risks (dividends are not paid if the company makes losses), but in return share in profits.

Subordinated Loans. Finance with repayment priority over equity capital, but not over commercial bank loans or other senior debt in the event of default or bankruptcy. Usually provided by sponsors. Subordinated debt contains a schedule for payment of interest and principal but may also allow participation in https://cashcentralpaydayloans.com/payday-loans-nc/ the up-side potential similar to equity. Read more