During this webinar, Partners James Salerno and Frederick Lark were joined by Fred Day, a managing partner in Brookfield’s Infrastructure Group, to explore the increasingly important role private credit plays in project finance. The discussion included an overview of project finance’s basic structure, a deeper dive into the growing role that private credit plays in the project finance space, and presentations of case studies that show how private credit has been a solution for infrastructure asset owners.
Top takeaways included:
- Private credit is gradually becoming an attractive alternative to infrastructure project financing provided by commercial banks because of rising interest rates and stricter regulations on bank capital allocation.
- Private credit has grown beyond its traditional base in insurance companies to include infrastructure funds and, in some cases, general corporate investors seeking to acquire tax credits established by the Inflation Reduction Act of 2022. Rather than being limited to senior secured operating company debt, private credit lenders have the option to be senior secured, mezz, holding company or back leverage. Additionally, direct lenders are more willing to lend against a portfolio of projects, infrastructure companies or minority positions in traditional infrastructure assets.
- Infrastructure developers can often find greater leverage and flexibility in credit terms from private credit than from traditional commercial lenders. Infrastructure funds have developed a deep expertise on a variety of infrastructure projects, allowing them to tailor their credit offerings to the specific needs of various borrowers, including developers of rooftop solar portfolios, data centers, fiber-optic telecoms and more.