Full day pre-conference in-depth learning sessions - Wednesday 19 November
Session A: Understanding lender safeguards in project finance for infrastructure development
These long format workshop style sessions will provide participants with the opportunity to deepen their understanding of infrastructure finance supply and structural public and private partnership fundamentals.
Delivered using a combination of seminars, interactive formats and hands-on exercises these sessions will provide a practical understanding of essential elements of infrastructure funding, tailored to your specific needs.
Both sessions run for one full day. Registration and morning coffee is at 08:30 and sessions will conclude at 17:00. Lunch, morning and afternoon tea will be provided.
Session A
Understanding lender safeguards in project finance for infrastructure development
Warranties, undertakings, representations, step-in, direct agreement, taking security,
oh my!
The devil of lender protection is in the details, and it is critical for project companies to have a clear understanding of their positive and negative undertaking requirements and potential triggers to lenders to manage potential risk through defensive or offensive actions. Likewise, lenders on complex infrastructure assets can risk significant loss through failing to take appropriate measures to protect their financial return.
This in-depth learning session will give a general overview of key lender safeguards applicable to anyone who is involved in infrastructure asset origination or finance provision offering scenario demonstrations and role-playing and the opportunity for detailed recommendations around a participant’s case examples if desired.
Agenda
- Warranties, undertakings and representations – controlling the project risk profile
- Positive and negative undertakings – ensuring due diligence in coverage
- Examining and workshopping example breaches
- Appeal provisions for alleged breaches and rights to cure
- Step in rights – when and how can they be exerted?
- Case study examples of step-ins and step-outs
- Novation – the point of no return
- Sample cases of novation, how it occurred and how it might have been avoided
- Direct agreements between project partners and lenders – what do you need?
- Role playing scenarios of different direct agreements between project partners for security over project assets, personnel and costs
- Taking security – understanding Australian legal provisions for lenders to a project to secure their lending
- Lender safeguard clinic – working through real or hypothetical examples from workshop participants
Workshop Leaders
Michael Hassall
Commercial Advisor (Infrastructure)
CGI Consulting Pty Ltd
Andrew Biagioni
Infrastructure Investment & Delivery Consultant
CGI Consulting Pty Ltd
Roger Black
Executive Director
Infrastructure Association of Queensland
Session B
The fundamental maths of project finance - interpreting financial ratios and impacts on financial covenants
Lenders to infrastructure projects seek triggers which give them the capacity to intervene and salvage their investment if the financial credentials of a project appear to be in doubt. Some elements of the complexities of return, adherence to loan repayments and risks such as the balance of equity and debt investment in a project can be broken down to key metrics which allow lenders a simple snapshot view of the financial health of their investment. For project originators or project companies a strong understanding of these critical figures can inform sensible infrastructure asset and public/private partnership design. It pays to know your numbers.
This in-depth learning session is geared towards all participants in infrastructure project finance, with a broad overview of financial ratios, financial covenants, and potential lender interventions and their trigger points.
This helicopter view will be coloured with practical case study examples and break out sample calculation exercises with whole group answer work through (practice makes perfect). Participants will also have the opportunity to bring along real or hypothetical scenarios to work through during the session.
Agenda
- Examining how financial ratios are held as financial covenants which if broken can trigger defensive and offensive lender actions
- A brief run through the glossary of essential terms and concepts prefacing financial ratios
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Examining the ratios and appropriate levels for different investor and infrastructure asset types:
- Debt – equity (D/E) ratio
- The loan life cover ratio (LLCR)
- The debt service cover ratio (DSCR)
- Rate of return (ROR)
- Weighted average cost of capital (WACC) - Examining case examples of appropriate ratios for a range of infrastructure asset types and investors
- Understanding due diligence processes of financial ratio examination prior to financial close
- Financial ratios that have gone askew and implications for project companies, shareholders and lenders
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Potential lender interventions and how they might be triggered:
- Blocking dividend distribution
- Sweeping cash from existing accounts
- Applying reserve account money to debt service,
- Taking control of additional rights of the borrower or its shareholder.
- Acceleration, cancellation of outstanding loan amounts or suspension of loans
- Increases to the loan interest margin
- Potential grounds for compensation of the lenders for additional investigation costs and other fees and fines - Financial ratio and financial covenant clinic - working through real or hypothetical examples from workshop participants
Workshop Leader
Noel Rafter
Managing Director, Corporate Finance/Restructuring
FTI Consulting