Description
Project bonds deviate from regular corporate bonds in that they are issued to finance a specific project. In this case, the bond proceeds are paid exclusively from the cash flow generated by that project instead of the overall revenue of the issuing entity.
Instrument category
Debt financing
Implementation status
Low - limited evidence available
Enabling conditions and success factors
- Particularly suitable for countries with a growing institutional investor base.
Instrument benefits
- Open up an alternative debt funding avenue to source financing for infrastructure-related projects.
- Offer an opportunity for institutional investors to participate in infrastructure projects through listed, tradable securities that can offer superior risk-adjusted returns.
Challenges and risks to implementation
- May be unattractive to investors with a lower appetite for risk.
- Not all debt portions of these deals will be able to take advantage of this funding source.
