How Chinese banks structure limited recourse lending

Author: | Published: 8 Jul 2010

In 2005 one of the principal state-owned Chinese banks assembled a panel of law firms to advise it on its overseas limited recourse lending program. After a lengthy vetting process, selected panel firms were summoned to the bank's Beijing headquarters to be briefed on the program itself together with terms for counsel engagement.

An impressive array of international and domestic project finance advisory firms attended. They were impressed by the bank's ambitious lending plans spanning Asia and Europe, the African continent and the Americas. Enduring a relatively slow period in domestic project financings following the closing of the initial three big ethylene cracker financings earlier in the decade, these aggressive and expansive objectives seemed to be just the tonic that the Chinese project finance industry needed. And then came the terms of engagement.

Once the bank resolved to enter into a project, the head of the bank's in-house legal department...