What are the key features of a structured finance project?

Structured finance projects have several key features that make them unique.

Here are some of the key features of a structured finance project:

1. Financing of Identifiable Cash Flows: Structured finance projects involve the financing of existing or future identifiable cash flows with limited recourse to the company. This means that the project’s cash flows are used to pay back the debt and equity used to finance the project.
2. Risk Management: Risk management is a key element in structured financing. Structured finance projects are designed to mitigate risks associated with project financing by spreading the risk among a larger pool of investors.
3. Special Purpose Vehicle (SPV): Structured finance projects typically involve the creation of a special purpose vehicle (SPV) to hold the assets and liabilities of the project. The SPV is a separate legal entity that is used to isolate the project from the risks associated with the parent company.
4. Debt and Equity Financing: Structured finance projects involve combining debt, equity, and credit enhancement to create a financing structure that is tailored to the specific needs of the project. The debt and equity used to finance the project are paid back from the cash flow generated by the project.
5. Non-Recourse or Limited Recourse Financing: Structured finance projects are generally non-recourse or limited recourse financing structures. This means that the debt and equity used to finance the project are paid back from the cash flow generated by the project, and the investors have limited liability beyond the assets of the project.

Overall, structured finance projects involve the financing of identifiable cash flows with limited recourse to the company, risk management, the creation of a special purpose vehicle, debt and equity financing, and non-recourse or limited recourse financing. These features make structured finance projects a unique and effective way to finance long-term infrastructure, industrial projects, and public services.