The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:
In a typical project finance transaction, the lenders rely heavily on the revenues generated by the project for repayment of the loan.
As a result, project finance lenders will impose strict restrictions on how the project company uses its cash. This Practice Note examines how the lenders commonly impose these restrictions in project finance transactions.
Project finance lenders usually require the project company to establish a number of bank accounts (known as the 'project accounts') and prohibit the project company from opening any other bank accounts (see Practice Note: Project finance—covenants).
Each project account has a specified purpose relating to the project. By restricting the project company's bank accounts in this way, the lenders are able to:
monitor the cash flows through the project and regulate its allocation
ensure that the project company maintains adequate reserves to cover contingencies (ie the costs which arise when the project doesn't go according to plan), and
prevent any leakage of cash out of the project which would bypass the lenders
The project company's cash assets are critical to the lenders and the lenders will generally insist on taking security over the project accounts and the balances in them. For information on taking security over cash deposits, see Practice Note: Taking security over cash deposits in bank accounts.
Like any commercial
**excludes LexisPSL Practice Compliance, Practice Management and Risk and Compliance. To discuss trialling these LexisPSL services please email customer service via our online form. Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.
To view the latest version of this document and thousands of others like it, sign-in to LexisPSL or register for a free trial.
Existing user? Sign-in
Take a free trial
Take a free trial
0330 161 1234