Fitch: Sub Debt Can Help Project Finance Reach Investment Grade Rating.Business Editors NEW YORK--(BUSINESS WIRE)--Sept. 11, 2002 Many well-conceived and otherwise strong projects (including railroads rail·road n. 1. A road composed of parallel steel rails supported by ties and providing a track for locomotive-drawn trains or other wheeled vehicles. 2. , bridges, toll roads The following is a list of toll roads. Toll roads are roads on which a toll authority collects a fee for use. This list also contains toll bridges and toll tunnels. Lists of these subsets of toll roads can be found in List of toll bridges and List of toll tunnels. , and power plants) fail to achieve investment-grade senior debt ratings due solely to excessive debt levels. By integrating a tier of appropriately structured subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". , project sponsors can optimize the credit quality of the senior project debt while providing the minimum acceptable level of equity credit, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a new report published today by Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. . The research report was released in anticipation of the Fitch Ratings Project Finance Conference scheduled for Sept. 18, 2002. 'When Fitch has rated project transactions that include both senior and subordinated debt, historically the focus has been on the senior project debt,' said John Kunkle, Senior Director, Fitch Ratings. 'Increasingly, Fitch is being asked to also rate the subordinated debt of project entities, and a key question in determining the level of subordination is whether the sub debt is comparable to conventional corporate sub debt or is deeply subordinated.' The new report outlines Fitch's methodology for assessing and rating project debt when subordinated debt is utilized in the financing structure. The report also includes two case studies, the Alameda Corridor The Alameda Corridor is a 20 mile (32 km) freight rail "expressway"[1] owned by the Alameda Corridor Transportation Authority (AAR reporting marks ATAX Transportation Authority and AES Drax. 'By adding a layer of appropriately structured sub debt, the credit quality of the senior project debt will most likely be enhanced, or at least not impaired,' said Kunkle. 'At the same time, this addition of layer financing will allow a higher aggregate amount of project debt to be issued and thereby reduce the required amount of project debt to be issued and thereby reduce the required amount of more costly equity capital.' The topic of project finance subordinated debt will be one of several topics discussed at the Fitch Ratings Project Finance Seminar scheduled to be held in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. on Wednesday, Sept. 18, 2002. For more information and to reserve a space at the seminar, please contact Karen Daniels at 1-312-368-3152. The new report 'Layer It On - The Essentials of Rating Project Subordinated Debt' can be found on FitchResearch, the Fitch Ratings subscription-based web site located at 'www.fitchratings.com'. |
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