Repayment, prepayment and cancellation provisions in project finance facilities agreements

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Repayment, prepayment and cancellation provisions in project finance facilities agreements
  • What types of repayment provisions are particular to project finance facilities?
  • What types of prepayment provisions are particular to project finance facilities?
  • Voluntary prepayment
  • Mandatory prepayment
  • What types of voluntary cancellation provisions are particular to project finance facilities?

Repayment, prepayment and cancellation provisions in project finance facilities agreements

Financing for a project finance transaction will typically be by way of senior debt usually consisting of a development term loan facility to be used to fund the development and/or construction costs for the project.

This Practice Note explains the types of:

  1. repayment provisions

  2. prepayment provisions, and

  3. cancellation provisions

that can typically be found in a project finance development term loan facility.

This explanation includes examples of how these provisions may differ to the typical repayment, prepayment and cancellation provisions found in a corporate term loan facility. It also discusses some of the reasons for these differences, for example, the long term nature of a development term loan facility, the fact that during the development and/or construction phase a project does not generate any revenue and the inter-relationship the repayment and prepayment provisions have with the technical monitoring of a project both during the development and construction phase and during the operating phase of the project.

What types of repayment provisions are particular to project finance facilities?

Term loans are typically repaid either in scheduled instalments or as a bullet at the end of the term. For more information on repayment of term loans generally, see: Repayment. Like many other term loans, a development term loan will usually be repaid in instalments (most often on a 6 monthly basis) but,

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