The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Building the blocks of a new era in project finance

There’s a problem in project finance. Banks no longer want to hold assets. Governments want to launch huge infrastructure projects. Can traditional asset managers and pension funds, which like the risk/reward profile of infrastructure, fill the gap?

Project financing is a stark example of a market where high risk-weighted charges and the high cost of long-dated liabilities are leading to a reduction in banks’ appetite to provide financing.

As in lending to small and medium-sized enterprises (SMEs), where policymakers are badgering banks to keep lending even while announcing new capital and liquidity requirements that make it hard for them to do so, project and infrastructure finance increasingly looks central to efforts to kick-start stalled economies. And as with SME lending, it looks as if institutional investors and asset managers will have to pick up the slack from the banks.

At the end of June, Bank of Ireland offered a clue as to the way forward for project and infrastructure finance when it disclosed an agreement to sell a portfolio of UK loans, with total drawn and undrawn commitments of circa €270 million, to the Danish pension fund PensionDanmark. The pension fund picked up the portfolio at an attractive discount, at a price around 83.5% of these commitments’ face value, which should bring a decent yield.

The next stop for long-term real-money investors after buying up seasoned portfolios from forced sellers is to position themselves as the source of new funding.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree