Project Financing Discussion Questions

Project Financing Discussion Questions1. ______________ financing is a debt obligation that is
backed by the ______________ of an asset or credit support provided by a third party. The key in an asset
______________ is to remove the assets (i.e., loans and
receivables) from the ______________ sheet of an entity.
The special purpose ______________ (______________) is
the entity that acquires the ______________ and sells the
______________ to purchase the assets.
2. Structured finance is used by ______________ to fund
major projects. A benefit to using structured finance is that
the lenders look to the cash ______________ from the
project being financed rather than the corporation or
______________ seeking funding. This financing technique
is called ______________ financing and uses the
______________ to accomplish its financing objectives.
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3. While a(n) ______________ may be willing to look initially to
the cash ______________ of a project as the source of funds
for ______________ of the loan, the lender must also feel
comfortable that the loan will in fact be ______________ on
a(n) ______________-case basis. This may involve undertakings or direct or indirect ______________ by third parties
who are motivated in some way to provide such guarantees.
4. The ______________ party in a project is its promoter or
______________. A project may have one or several
______________. The motivation of ______________ companies acting as sponsors is to profit in some way from
the ______________ or ______________ of the project.
The motivation of ______________ companies for sponsoring a project may be simply to make a(n)
______________ from selling the product produced by the
project. In many instances, the motivation for the project
is to provide ______________ or ______________ of a
sponsor’s basic product or to ensure a source of supply
vital to the sponsor’s business.
5. The ultimate goal in project financing is to arrange
______________ for a project which will benefit the
______________ and at the same not affect the
______________ standing or ______________ sheet. One
way this can be accomplished is by using the credit of a(n)
______________ party to support the transaction. Such a
party then becomes a sponsor. However, projects are
rarely financed ______________ on their own merits without credit support.
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6. Project ______________ regard a project as acceptable
only after the plant or facility has been in ______________
for a sufficient period of ______________ to ensure that
the plant will in fact ______________ the product or service at the price, in the ______________, and to the standards assumed in the financial ______________ that
formed the basis for the financing. This ______________
risk period may run from a few months to several years.
7. Project financing can sometimes be used to improve the
______________ on the capital ______________ in a
project by ______________ the investment to a greater
extent than would be possible in a straight ______________
financing of the project. This can be accomplished by locating other ______________ interested in getting the project
built, and shifting some of the ______________ coverage to
such parties through ______________ or ______________
guarantees.
8. ______________ benefits from any applicable tax credits,
______________ deductions, ______________ deductions,
______________ deductions, ______________ and development tax deductions, ______________-received credits,
______________ tax credits, ______________ gains, and
noncapital start-up expenses are very significant considerations in the investment, ______________ service, and cash
flow of most project financings. Care must be used in
structuring project financing to make sure that these tax
______________ are used.
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276 QUESTIONS AND PROBLEMS
9. When a project financing is housed in a(n) ______________
entity that does not have ______________ to shelter, it is
important to structure the project financing so that any tax
benefits can be ______________ to parties currently in a
position to ______________ such tax benefits. For U.S. federal income tax purposes, ______________ control is
required for tax ______________, except in the case of certain ______________ subsidiaries, in which ______________
control may require consolidation.