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Debt funds: More conduit than catch-all

03 November 2011

At a time when banks are looking to de-leverage their balance sheets, the traditional avenues open for them to shed project finance debt – during syndications and through collateralised debt obligations – are closed. True, some syndication has taken place but only on a limited basis and with the arranging banks comfortable at their initial commitments before any sell-down. In the run-up into Basel 3, which will force banks to better match their funding with their assets, 20 and 30-year project debt does not sit easily against traditional bank funding maturities of 3 months to 1 year. The great hope for infrastructure finance is that institutional investors will supplement bank liquidity and offer an exit for banks laden with project debt. The cleanest and simplest way for institutional investors to get involved by buying project bonds. However, bonds have been unable to get a foothold in the market because of...

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