Project Finance Academy Module 6: Project Finance Risk/Recovery

Project Finance Risk/Recovery forms Module 6 of the Project Finance Academy. This module will examine projects that have gone wrong, including a review of the credit factors/reasons why these deals would go wrong - incorrect 'project concepts'. Module highlights include: Project finance default history Risk linkages Due diligence Role of the credit/investment committee Anticipating problems/failures
Day 1 Project finance default history Non-performing loans Bond default/recoveries Evidence of repetition Long-cycle events New fashions Customer relationships Syndications/Loan trading Basel II Case studies: Iridium World. Why does Motorola consider this satellite telephony project to be a success! Besides the technology risk what market-risk pointers were evident? OrlyVAL – Why did the French banks support an airport-city link when urban mass-transit traffic Project Finance history is so appalling? Risk linkages Investor conflicts Case study: EuroDisney. Why were Disney’s prior real-estate failures not recognised? Due diligence Case studies: Victoria Hospitals Cogen, Australia: See how the risk management study identified grid weaknesses near the main generator Mumbai-Pune Tollway, India: Why is the traffic so slow when the alternative route is so difficult and unattractive to use? Eurotunnel: There are so many key lessons from this massive conflict of interest(s) Australian Magnesium: Why was this project aborted after the Project Finance and investment funding had been committed? Dulles Greenway: How is it possible to be so wrong on traffic in the automobile/driver-mad USA? Murrin Murrin: Although the Independent Engineer identified the risks, the bond project financing defaulted immediately Role of the credit/investment committee Credit scoring Loan compliance Approvals matrices Compliance Pre-committee screening process Anticipating problems/failures The Rule of 3 Risk Matrices Building in hazards into the forecasts/scenarios Case study: Western Harbour Crossing. Although traffic across Hong Kong Harbours is readily understood, why did this carefully-controlled structure fail? Default Legal states of play Bankruptcy Informal insolvency Administration Receivership Liquidation Styles New monies Break-up/reshaping Equity/mezzanine Patience Prep for scale ‘War’ Project financier’s toolkit New management Default derivatives Debt: equity swaps Securitisation Alternate dispute resolution Expert/delphi technique Role of regulator Re-regulation Regulator’s position New techniques Case study: Citibank’s project finance CLO. See the international and sector approach taken on the third Project Financed CLO in the Project Finance bond market.