The financing of a Scottish roads project could solve the
problem of negative carry that has long blocked the
infrastructure sector's funding streams.
The £175 million ($291 million) project financing has
created a deferred payment mechanism to remove the negative
carry that results from low interest rates and the absence of
monolines. The project bonds – known as forward
purchase bonds – were created for the financing of
motorway improvement in Scotland and are expected to pave the
way for copycat deals.
"These financings typically incur a large cost of carry,
putting a real brake on the development of the capital
markets," said Julian Davies, partner at Linklaters, who led on
the deal. "That problem has been solved by this deferred
The bonds, issued by Scots Road Partnership Finance and
acquired by Allianz Global Investors, comprise half of the
entire project's funding. The European Investment Bank (EIB)
provided the remaining...