Reviving EU project bonds

Author: IFLR Correspondent | Published: 20 Sep 2016

Before the financial crisis, European infrastructure projects were typically funded by a combination of monoline wrapped bonds and bank debt. With the crisis came a rapid decline in monoline insurers, the closing of the market for monoline wrapped bonds, credit and liquidity constraints on banks, and pressure on banks to delever. And while banks were still reeling, the Basel III global regulatory framework increased the cost to them for providing long-term funding.

Together with austerity measures restricting government procurement, these events severely curbed European infrastructure investment.

To get Europe building again, national governments and the European Commission initiated programmes to help unlock private capital investment in greenfield and brownfield projects, and to do Europe’s part in helping to bridge a $1 trillion global infrastructure gap. These programmes apply credit enhancement techniques to help notch up the credit rating of projects, making them more attractive to institutional investors. It had been...