A Pilot Study of Asset Securitization Financing for BOT Projects - In the View of the Private Sector
Date Issued
2014
Date
2014
Author(s)
Liu, Yi-Chieh
Abstract
Due to the limited financial rescources of the government and the catalysis of global free contention, BOT model has become a major solution for the governments to develop infrastructures. With the capital and the efficiency of private sector, BOT model can not only relieve the financial burden of the government, but also improve the quality and the performance of the infrastructure. The most important issue in a BOT project is the huge capital and that the concessionaire should be in charge of financing. Generally, in addition to own funds, private sector would seek for bank-loans in the form of project finance. However, the capital funding still lacks of liquidity and diversity. As project finance and asset securitization are both structured finance, when the assets of the project can be expected to have stable cash flows, such assets are feasible to be securitized. That is to say, since a BOT project can obtain funds by project finance due to projected cash flow, then asset securitization should also be applicable to this project.
Since the global financial markets are aggresively developing innovative financial instruments, this research expects to introduce a new financial practice – asset securitization, to fulfill the capital requirements of the private sector in a BOT project. BOT project adopting asset securitization combines the characteristics of each. Government grants the concession to the private sector, and the private sector grants the income rights to the public investors. However, asset securitization and BOT model has its own legal system, theory and schema, so there must be conflicts and discords while combining. This research is to study those conflicts and to discuss important issues. And then to generalize feasible structures for BOT project to adopt asset securitization in the system of Taiwan.
The results show that it is feasible in law for BOT project to implement “financial asset securitization” or “real estate securitization”. However there are lots of restrictions for securitized subjects and amount. Therefore which securitization model should be adopted depends on the relevant requirements of the private sector. Different restrictions for different models should be taken into consideration, to see whether asset securitization is the most competitive and efficient financing instrument at that time. Basically, it’s simpler for financial assets to be transferred to the Trust than real estate, thus it’s suggested that the private sector could give priority to adopting “financial asset securitization”. And, relevant measures and mechanism must be taken to ensure that the private sector still owns the concession granted by the government. Also the government should establish supervision and prevention mechanisms to prevent the moral hazard of private sector.
Through a financial calculation, this research also verify that when a BOT project adopts financial asset securitization, large cash inflows in the early stage and the net present value, the internal return rate and the self-liquidation ratio of the project can all be improved. In addition to financial performance, the greatest benefit of securitization for the private sector is that the recovery cash could be used for other financing or investment decisions. The emergency needs for funds can be accomplished.
Subjects
BOT
PPP
促參
金融資產證券化
不動產證券化
專案融資
Type
thesis
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