A public-private partnership (PPP) project will involve financing from various sources, in some
combination of equity and debt. The ratios of these different contributions will depend on negotiations
between the lenders and the shareholders.
This includes:
- Equity Contributions
- Debt Contributions
- Bank Guarantees/ Letter of Credit/ Performance Guarantees
- Bond/Capital Markets Financing
Equity Contributions
Project sponsors are the investors in the project company that are likely to be providing expertise and
some of the services to the project company (such as construction or operations services). Sponsor
funding is generally through equity contributions in the project company through share capital and other
shareholder funds. Equity holds the lowest priority of the funding contributions in a project, therefore the
other contributors (such as lenders) will have the right to project assets and revenues before the equity
contributors can obtain any return; or, on termination or insolvency, any repayment. Equity contributions
bear the highest risk and therefore potentially receive the highest returns.
Equity contributors in project financed transactions might include the project participants, local investors,
the host government, the grantor, other interested governments, institutional investors and bilateral or
multilateral organizations. Equity investors will want to pay in their equity investment as late as possible
in the construction period, even wholly back-ended to save costs and improve their aggregate equity
return.
Debt Contributions
Debt can be obtained from many sources, including commercial lenders, institutional investors, export
credit agencies, bilateral or multilateral organizations, bondholders and sometimes the host country
government.
Unlike equity contributions, debt contributions have the highest priority amongst the invested funds.
Repayment of debt is generally tied to a fixed or floating rate of interest and a programme of periodic
payments. The source of debt will have an important influence on the nature of the debt provided.
Commercial banks are desirable as long term debt providers, given their flexibility in renegotiating loans
and reacting to new or unforeseen conditions. This flexibility may not be available, for example, from
bondholders. Another source of project debt is equipment suppliers. Suppliers will provide financing in
order to sell their equipment, and may provide more aggressive terms accordingly.
Finance lessors pay for assets and lease them back to the project company. Whether or not the lessor is
the equipment supplier, it can provide competitively priced financing, in particular to the extent the
lessor can set off the cost of equipment against its profits (since the project company will not have profits
in the early years to benefit from this set off). Leasing can provide additional benefits in the financing of
infrastructure projects, in particular additional or earlier tax allowances, new sources of finance, and
improved security interests where asset ownership is retained off-shore in a more security friendly
jurisdiction. But leasing also adds complexity to an already complex structure, adding another creditor’s
interests and influence over project assets.
Syndication
In syndicated lending, each amount advanced by one of the syndicated banks constitutes a separate loan,
with the bank’s obligations and rights being several. The banks will not underwrite each other’s
obligations, and each bank will want to sue separately and make its own set off arrangements. The agent
bank for the syndicate will verify conditions precedent, receive funds, calculate interest rates and make
demands on the borrower on behalf of the syndicate. Only certain bank actions will be subject to
majority bank control, for example acceleration (where the whole amount due under the loan becomes
due and payable immediately).
Bank Guarantees/Letters of Credit/Performance Guarantees Bank guarantees form an important part of
project financing, allowing counter-parties immediate access to payment without the cost of locking up
cash. Such guarantees may be “on demand” or only payable once the default is proven in court,
adjudication or arbitration.
A bank issuing a guarantee, letter of credit or performance bond will fix the amount and obtain a counter
indemnity from the customer, possibly secured against fixed or floating charges or cash deposits. The
issuer will be entitled to convert the counter indemnity payments into loans or demand immediate
repayment. The issuers will enter into the intercreditor agreement to ensure sharing of rights over project
assets.
Bond/Capital Markets Financing
Bond financing allows the borrower to access debt directly from individuals and institutions, rather than
using commercial lenders as intermediaries. The issuer (the borrower) sells the bonds to the investors.
The lead manager helps the issuer to market the bonds. A trustee holds rights and acts on behalf of the
investors, stopping any one investor from independently declaring a default. Bond financing generally
provides lower borrowing costs, if the credit rating for the project is sufficiently strong. Rating agencies
may be consulted when structuring the project to maximize the credit rating for the project.
Bond financing provides a number of benefits to projects including lower interest rates, longer maturity
(which can be very helpful given the duration of most of these projects) and more liquidity.
Special beds and mattresses
Max Global group company limited is working to ensure that they provide modern electric beds that can be adjusted to certain positions to ensure the patient is comfortable. The mattresses are comfortable, skin friendly ,easy to clean, water and dust resistant.
Ultra-sound, X-ray, ECG Machines
They are upgraded machines ,efficient and if provided to local hospitals it will reduce the cost of medication thus ensuring that everybody can afford.
Diabetes/Blood Pressure Monitoring Kits
Due to a rise in diabetes and blood pressure cases, Max Global group
company aims to supply the kits at an affordable rate so that every
individual can afford.
Wheelchairs and Others
Max Global discovered that people living with disabilities do not
have the required facilities for the special need, therefore we have
taken an initiative to supply customized equipment.
