The Emerging Project Bond Market : Covenant Provisions and Credit Spreads

Dailami, Mansoor ; Hauswald, Robert

World Bank, Washington, DC

关键词: EMERGING ECONOMIES;    BOND OPTIONS;    COVENANTS;    CREDIT SYSTEMS;    MARKET ANALYSIS;   

DOI  :  10.1596/1813-9450-3095
RP-ID  :  WPS3095

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The emergence in the 1990s of a nascentproject bond market to fund long-term infrastructureprojects in developing countries merits attention. Theauthors compile detailed information on a sample of 105bonds issued between January 1993 and March 2002 forfinancing infrastructure projects in developing countries,document their contractual covenants, and analyze theirpricing determinants. They find that on average, projectbonds are issued at approximately 300 basis points aboveU.S. Treasury securities, have a surprisingly high issuesize of US$278 million, a maturity of slightly under 12years, and are rated slightly below investment grade. Interms of geographic origin, projects in Asia and LatinAmerica have issued more bonds than those located in otherregions. Much of the recent work relating to the role ofcontractual covenants to the determination of bond priceshas focused on the U.S. corporate bond market with itsunique bankruptcy code - Chapter 11 - and well developedlegal framework, recognizing the bond contract as the soleinstrument of defining the rights and duties of variousparties. In circumstances in which the underpinning legaland institutional frameworks governing contract formationand enforcement are not well developed, the link betweenbond pricing and legal framework becomes important. Thisfinding is confirmed by the authors' econometricanalysis of project bond pricing model. So, investors takeinto account the quality of the host country's legalframework and reward projects located in countries thatadhere to the rule of law with tighter credit spreads andlower funding costs.