medium · Private Credit loan-structures-instruments
An infrastructure debt fund lends $200M to a solar farm project. The debt has a 20-year term and is 'non-recourse' to the parent company.
What is the primary risk factor the lender evaluates?
- The predictability of the project's long-term cash flows (e.g., via Power Purchase Agreements) to service the debt over two decades.
- The 'Full-Ratchet' anti-dilution protection provided under the project's federal renewable energy tax subsidy program terms.
- The market capitalization of the parent company, since the sponsor is presumed to be the ultimate guarantor of the $200M principal.
- The 'Multiple Arbitrage' potential at exit, assuming the solar farm asset is eventually resold to a strategic infrastructure 'Platform' buyer.
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