Structured financing of large-scale investment projects viola-funding February 19, 2024

Structured financing of large-scale investment projects

Structured financing of large-scale projects
Structured financing of large-scale projects

Selecting the right sources of funds and financial instruments for large projects is one of the most important tasks of modern business. Today, structured financing of large-scale projects has numerous advantages for enterprises in energy, infrastructure, heavy industry, agriculture, real estate and tourism, taking into account high flexibility and access to important resources.

The development of the financial market enables companies to use an ever wider range of financial instruments adapted to their capital needs, risks and the changing conditions of the competitive environment.

Structured financing of large-scale projects has many advantages for fast-growing businesses in infrastructure and significant resources.

Viola Funding Limited offers structured financing of large investment projects worldwide with participation of reputable high-net-worth angel investors, venture capital funds and large private investors.

Innovative business financing tools

The financial strategy of the business, which covers all aspects of its development, plays a key role in achieving these goals. A company’s investment and financial strategies may be based on traditional financing instruments, but in recent years new solutions have emerged that increase the efficiency of doing business and contribute to increasing its value.

However, the extremely limited choice of financial solutions reduces business flexibility and makes it impossible to benefit from more sophisticated financial instruments.

A traditional financial strategy uses well-known capital-raising instruments, such as stocks, syndicated bank loans, and numerous long-term and short-term fixed-rate debt instruments.

On the other hand, an innovative financing strategy for large projects (e.g., hybrid instruments and structured products), allows the business to flexibly shape the capital structure best adapted to the company’s financial needs and market environment.

The primary goal of any business is to maximize its value and benefit to its owners.

Achieving this goal requires making the right decisions and using tools that precisely match the current market conditions and financial needs of the company.

It is utmost important  to differentiate the relationship between financial innovation transition and technological innovation.

Implementing technological innovation to improve a company’s competitive advantage often requires finding innovative sources and tools to finance operations. This is especially relevant for ambitious start-ups, when traditional forms of financing are not available due to high investment risk and high cost of capital.

We are interested in financing projects in energy, infrastructure, heavy industry, real estate, tourism, waste processing and other sectors.

Structured financing of large-scale projects: types and characteristics

Structured finance for investment projects combines traditional instruments with various derivatives. This means that the financial benefits of the parties depend on changes in a number of market parameters, such as interest rates, exchange rates, commodity prices, etc. Using a combination of several financial instruments, the business gets new opportunities in terms of attracting capital, meeting the expectations of investors.

Products offered for structured financing for large-scale projects are in the following parameters:

• Structured investment certificates, etc.
• Structured bonds.

Breaking the deposit agreement before maturity usually results in deduction of a portion of the deposited funds and non-payment of interest.

The profit of a bond purchaser depends on changes of certain market parameters. The issuers of structured bonds can be various companies, including those outside the financial sector. Structured investment certificates may be issued by closed-end investment funds and the investor’s return depends on changes in a particular underlying index.

Individual instruments can vary in their level of protection, ranging from a 100% guarantee to partial protection. Some structured products offer a minimum rate of return guarantee. However, it is worth bearing in mind that a higher guarantee means a lower return on investment.

Structured instruments can also be categorized by their ability to generate cash flows for investors.

There are instruments that offer regular cash flows during the investment period, as well as those that only generate returns at the end of the investment period.

The growing interest in structured products encourages many non-financial corporations to consider using this group of financial innovations to raise sources of financing for their activities, including large long-term projects.

Corporate structured finance products

Structured products issued by corporations are complex financial instruments in which the issuer undertakes to pay an investor at maturity a certain amount depending on the level of the chosen parameter based on a predefined payoff formula.

Corporate financial products are commonly classified into structured debt instruments (promissory notes or structured bonds) and so-called hybrid instruments.

A hybrid instrument combines several components of the issuing company’s capital. Some hybrid instruments may also contain derivatives in their structure, but they will relate to other products of the same issuer. Investor profits for hybrid instruments depend on changes in one or more variables that are beyond the control of the issuer, such as fluctuations in exchange rates or commodity prices.

It is explained by the convenience of combining the process of capital raising with the process of business risk management, in particular, capital structure risks, interest rate risks, currency risks and commodity price fluctuations.

Corporate structured products can be based on any assets of the issuing company.

-Equity-linked notes.
-Commodity-linked notes.
-Interest rate-linked notes.
-Currency-linked notes

Depending on the terms of the convertible bonds, the stock option may entitle the investor to buy a whole basket of shares or to convert into shares of the issuer’s stock if they reach the same value as the other shares.

Another type of structured instrument based on stock market performance is structured bonds, which give an investor a higher return as stock prices rise – these are equity bull notes. In the case of unsecured bull notes, their value increases when stock prices or stock indexes rise and interest rates fall.

Structured finance options for businesses

Combining several financial instruments into one, thanks to the synergistic effect, reduces transaction costs associated with the issuance of these securities and avoids the costs associated with managing derivative financial instruments. It also makes it possible to significantly reduce credit, operational and other risks associated with derivative contracts.

Competition from other companies, especially from large financial institutions offering structured products, is an additional threat. Therefore, companies that want to raise capital by issuing structured instruments should prepare their offerings in such a way that they are accessible and attractive to a wide range of investors.

After a successful issuance for some products, the company may be exposed to liquidity risk if investors decide to withdraw from the project and withdraw funds before a specified deadline. Additional risk may arise on embedded derivatives if changes in the underlying financial parameters are significantly higher than expected.

Structured financing for large-scale projects offers numerous advantages to companies stemming from the ability to flexibly shape their cash flows and capital structure.

Structured products bring significant benefits to investors and issuing companies.

Today, banks and other financial institutions play a dominant role in the structured finance market, but there are examples of successful non-financial corporations that raise capital by issuing such securities.

We have extensive experience in large projects around the world, and are ready to use our financing capabilities to help your business grow and develop.

Contact Viola Funding Limited and discuss your project details with our finance team.

eMAIL:[email protected]


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