The Emerging Project Bond Market : Covenant Provisions and Credit Spreads
The emergence in the 1990s of a nascent project bond market to fund long-term infrastructure projects in developing countries merits attention. The authors compile detailed information on a sample of 105 bonds issued between January 1993 and March...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2003/07/2475061/emerging-project-bond-market-covenant-provisions-credit-spreads http://hdl.handle.net/10986/18145 |
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okr-10986-181452021-04-23T14:03:41Z The Emerging Project Bond Market : Covenant Provisions and Credit Spreads Dailami, Mansoor Hauswald, Robert EMERGING ECONOMIES BOND OPTIONS COVENANTS CREDIT SYSTEMS MARKET ANALYSIS INFRASTRUCTURE PROJECTS DEVELOPING COUNTRIES PRICE CONTINGENCIES SECURITIES REGULATION BOND PRICES CORPORATE BONDS LEGAL FRAMEWORK CONTRACT COMMITMENT INSTITUTIONAL FRAMEWORK CONTRACT ENFORCEMENT ECONOMETRIC MODELS OF INTERNATIONAL TRADE RULE OF LAW FUNDING CAPACITY ACCESS TO FINANCING ADVERSE CONSEQUENCES AIRPORTS ASSET DIVERSIFICATION ASSET SALE ASSET SUBSTITUTION ASSET-BACKED SECURITIES BALANCE SHEET BANK LOANS BANKRUPTCY BANKRUPTCY CODE BANKRUPTCY PROCEEDINGS BOND PRICES BONDS BORROWING CAPACITY BUILDING CAPITAL FLOWS CAPITAL INVESTMENT CAPITAL MARKETS CAPITALIZATION CASH FLOW CASH FLOWS COMMON STOCK CONTRACTUAL ARRANGEMENTS CORPORATE FINANCE CORPORATE GOVERNANCE CREDIT RATING CREDIT RATINGS CREDIT RISK CREDITOR CREDITWORTHINESS DEBT DEBT COVENANTS DEBT INSTRUMENTS DEBT SECURITIES DEBT SERVICE DEBTOR DIVIDENDS ECONOMETRIC ANALYSIS ECONOMIC GROWTH ECONOMICS FINANCIAL INSTITUTIONS FINANCIAL RISK FINANCIAL STRUCTURE FIXED ASSET GDP INSTITUTIONAL DEVELOPMENT INSURANCE INTERNATIONAL BOND MARKETS INTERNATIONAL BONDS LAWS LEGAL FRAMEWORK LIQUIDATION LIQUIDITY MARKET RISK MATURITIES PENALTIES PORTS PRIVATIZATION PROJECT FINANCING PROPERTY RIGHTS PROVISIONS PUBLIC DEBT PUBLIC SECTOR REDEMPTION REGRESSION ANALYSIS RESERVE ACCOUNTS RISK FACTORS RISK PREMIA RISK SHARING ROADS SECURITIES SUNK COSTS TAX TAX LAW TRANSACTION COSTS TRANSPORT TREASURY VALUATION WEALTH FUNDING CAPACITY ACCESS TO FINANCING The emergence in the 1990s of a nascent project bond market to fund long-term infrastructure projects in developing countries merits attention. The authors compile detailed information on a sample of 105 bonds issued between January 1993 and March 2002 for financing infrastructure projects in developing countries, document their contractual covenants, and analyze their pricing determinants. They find that on average, project bonds are issued at approximately 300 basis points above U.S. Treasury securities, have a surprisingly high issue size of US$278 million, a maturity of slightly under 12 years, and are rated slightly below investment grade. In terms of geographic origin, projects in Asia and Latin America have issued more bonds than those located in other regions. Much of the recent work relating to the role of contractual covenants to the determination of bond prices has focused on the U.S. corporate bond market with its unique bankruptcy code - Chapter 11 - and well developed legal framework, recognizing the bond contract as the sole instrument of defining the rights and duties of various parties. In circumstances in which the underpinning legal and institutional frameworks governing contract formation and enforcement are not well developed, the link between bond pricing and legal framework becomes important. This finding is confirmed by the authors' econometric analysis of project bond pricing model. So, investors take into account the quality of the host country's legal framework and reward projects located in countries that adhere to the rule of law with tighter credit spreads and lower funding costs. 2014-05-01T21:55:23Z 2014-05-01T21:55:23Z 2003-07 http://documents.worldbank.org/curated/en/2003/07/2475061/emerging-project-bond-market-covenant-provisions-credit-spreads http://hdl.handle.net/10986/18145 English en_US Policy Research Working Paper;No. 3095 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
EMERGING ECONOMIES BOND OPTIONS COVENANTS CREDIT SYSTEMS MARKET ANALYSIS INFRASTRUCTURE PROJECTS DEVELOPING COUNTRIES PRICE CONTINGENCIES SECURITIES REGULATION BOND PRICES CORPORATE BONDS LEGAL FRAMEWORK CONTRACT COMMITMENT INSTITUTIONAL FRAMEWORK CONTRACT ENFORCEMENT ECONOMETRIC MODELS OF INTERNATIONAL TRADE RULE OF LAW FUNDING CAPACITY ACCESS TO FINANCING ADVERSE CONSEQUENCES AIRPORTS ASSET DIVERSIFICATION ASSET SALE ASSET SUBSTITUTION ASSET-BACKED SECURITIES BALANCE SHEET BANK LOANS BANKRUPTCY BANKRUPTCY CODE BANKRUPTCY PROCEEDINGS BOND PRICES BONDS BORROWING CAPACITY BUILDING CAPITAL FLOWS CAPITAL INVESTMENT CAPITAL MARKETS CAPITALIZATION CASH FLOW CASH FLOWS COMMON STOCK CONTRACTUAL ARRANGEMENTS CORPORATE FINANCE CORPORATE GOVERNANCE CREDIT RATING CREDIT RATINGS CREDIT RISK CREDITOR CREDITWORTHINESS DEBT DEBT COVENANTS DEBT INSTRUMENTS DEBT SECURITIES DEBT SERVICE DEBTOR DIVIDENDS ECONOMETRIC ANALYSIS ECONOMIC GROWTH ECONOMICS FINANCIAL INSTITUTIONS FINANCIAL RISK FINANCIAL STRUCTURE FIXED ASSET GDP INSTITUTIONAL DEVELOPMENT INSURANCE INTERNATIONAL BOND MARKETS INTERNATIONAL BONDS LAWS LEGAL FRAMEWORK LIQUIDATION LIQUIDITY MARKET RISK MATURITIES PENALTIES PORTS PRIVATIZATION PROJECT FINANCING PROPERTY RIGHTS PROVISIONS PUBLIC DEBT PUBLIC SECTOR REDEMPTION REGRESSION ANALYSIS RESERVE ACCOUNTS RISK FACTORS RISK PREMIA RISK SHARING ROADS SECURITIES SUNK COSTS TAX TAX LAW TRANSACTION COSTS TRANSPORT TREASURY VALUATION WEALTH FUNDING CAPACITY ACCESS TO FINANCING |
| spellingShingle |
EMERGING ECONOMIES BOND OPTIONS COVENANTS CREDIT SYSTEMS MARKET ANALYSIS INFRASTRUCTURE PROJECTS DEVELOPING COUNTRIES PRICE CONTINGENCIES SECURITIES REGULATION BOND PRICES CORPORATE BONDS LEGAL FRAMEWORK CONTRACT COMMITMENT INSTITUTIONAL FRAMEWORK CONTRACT ENFORCEMENT ECONOMETRIC MODELS OF INTERNATIONAL TRADE RULE OF LAW FUNDING CAPACITY ACCESS TO FINANCING ADVERSE CONSEQUENCES AIRPORTS ASSET DIVERSIFICATION ASSET SALE ASSET SUBSTITUTION ASSET-BACKED SECURITIES BALANCE SHEET BANK LOANS BANKRUPTCY BANKRUPTCY CODE BANKRUPTCY PROCEEDINGS BOND PRICES BONDS BORROWING CAPACITY BUILDING CAPITAL FLOWS CAPITAL INVESTMENT CAPITAL MARKETS CAPITALIZATION CASH FLOW CASH FLOWS COMMON STOCK CONTRACTUAL ARRANGEMENTS CORPORATE FINANCE CORPORATE GOVERNANCE CREDIT RATING CREDIT RATINGS CREDIT RISK CREDITOR CREDITWORTHINESS DEBT DEBT COVENANTS DEBT INSTRUMENTS DEBT SECURITIES DEBT SERVICE DEBTOR DIVIDENDS ECONOMETRIC ANALYSIS ECONOMIC GROWTH ECONOMICS FINANCIAL INSTITUTIONS FINANCIAL RISK FINANCIAL STRUCTURE FIXED ASSET GDP INSTITUTIONAL DEVELOPMENT INSURANCE INTERNATIONAL BOND MARKETS INTERNATIONAL BONDS LAWS LEGAL FRAMEWORK LIQUIDATION LIQUIDITY MARKET RISK MATURITIES PENALTIES PORTS PRIVATIZATION PROJECT FINANCING PROPERTY RIGHTS PROVISIONS PUBLIC DEBT PUBLIC SECTOR REDEMPTION REGRESSION ANALYSIS RESERVE ACCOUNTS RISK FACTORS RISK PREMIA RISK SHARING ROADS SECURITIES SUNK COSTS TAX TAX LAW TRANSACTION COSTS TRANSPORT TREASURY VALUATION WEALTH FUNDING CAPACITY ACCESS TO FINANCING Dailami, Mansoor Hauswald, Robert The Emerging Project Bond Market : Covenant Provisions and Credit Spreads |
| relation |
Policy Research Working Paper;No. 3095 |
| description |
The emergence in the 1990s of a nascent
project bond market to fund long-term infrastructure
projects in developing countries merits attention. The
authors compile detailed information on a sample of 105
bonds issued between January 1993 and March 2002 for
financing infrastructure projects in developing countries,
document their contractual covenants, and analyze their
pricing determinants. They find that on average, project
bonds are issued at approximately 300 basis points above
U.S. Treasury securities, have a surprisingly high issue
size of US$278 million, a maturity of slightly under 12
years, and are rated slightly below investment grade. In
terms of geographic origin, projects in Asia and Latin
America have issued more bonds than those located in other
regions. Much of the recent work relating to the role of
contractual covenants to the determination of bond prices
has focused on the U.S. corporate bond market with its
unique bankruptcy code - Chapter 11 - and well developed
legal framework, recognizing the bond contract as the sole
instrument of defining the rights and duties of various
parties. In circumstances in which the underpinning legal
and institutional frameworks governing contract formation
and enforcement are not well developed, the link between
bond pricing and legal framework becomes important. This
finding is confirmed by the authors' econometric
analysis of project bond pricing model. So, investors take
into account the quality of the host country's legal
framework and reward projects located in countries that
adhere to the rule of law with tighter credit spreads and
lower funding costs. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Dailami, Mansoor Hauswald, Robert |
| author_facet |
Dailami, Mansoor Hauswald, Robert |
| author_sort |
Dailami, Mansoor |
| title |
The Emerging Project Bond Market : Covenant Provisions and Credit Spreads |
| title_short |
The Emerging Project Bond Market : Covenant Provisions and Credit Spreads |
| title_full |
The Emerging Project Bond Market : Covenant Provisions and Credit Spreads |
| title_fullStr |
The Emerging Project Bond Market : Covenant Provisions and Credit Spreads |
| title_full_unstemmed |
The Emerging Project Bond Market : Covenant Provisions and Credit Spreads |
| title_sort |
emerging project bond market : covenant provisions and credit spreads |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2003/07/2475061/emerging-project-bond-market-covenant-provisions-credit-spreads http://hdl.handle.net/10986/18145 |
| _version_ |
1764438982489276416 |