Details

Technical Note

INFRASTRUCTURE PROJECT BONDS

Zaghum Umar

INDUSTRY : Financial Instruments

AREA : Finance

ORGANIZATION : N/A

LENGTH : 16

LUMS No : 02-612-2016-2

PUBLICATION YEAR : 2016

KEYWORDS:

Infrastructure Project Bonds, Large Parties, Market Failures, Financing, Long-Term Commitment, Liabilities, Financing

DESCRIPTION:

Infrastructure assets are inherently different from other assets because infrastructure projects are often complex, require large number of parties and usually involve market failures. Since, infrastructure projects involve a long-term commitment due to high gestation period, an ideal stream of financing should match these characteristics. Currently, a great deal of infrastructure finance comes from banks that usually hold short-term liabilities and are not well-placed to hold long-term assets on their balance sheets for a long time. In this regard, infrastructure bonds would make suitable instruments to achieve infrastructure financing as both the sources and uses of funds perfectly match their gestation/maturities. This note intends to explore the opportunities and challenges presented by infrastructure bonds as a source of financing infrastructure development.

LEARNING OBJECTIVES:

1) Understand the need, role and characteristics of various instruments that constitute infrastructure bonds. 2) Appreciate the opportunities and congeniality of investment profile of institutional investors and a need of such long-term financing for infrastructure development. 3) Understand the mechanism of trade and issuance of infrastructre related securities. 4) Identify the trends and prevalence of infrastructure bonds and loans in Pakistan (specifically Sukuk Bonds) and other developed and developing countries.

SUBJECTS COVERED:

Finance