Project finance loans are typically non-recourse or partial-recourse. This is effected by setting up a Special Purpose Vehicle (SPV) which will enter into the financing arrangements with the lenders. Certain eventualities may require guarantees from the project sponsors or equity holders – for example they may provide indemnities (guarantees) to the lenders to cover eventualities where certain of their actions lead to the failure of the project.
As a comparator, under a full-recourse loan, the project sponsor guarantees repayment, irrespective of the outcome of the project.
Verdigris Project Finance
