Debt Restructuring of Distressed Indian Construction Projects (original) (raw)
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Strad Research, 2021
In present Scenario, the projects in India has been funded by global banks like Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB),European Investment Bank(EIB), New Development Bank (NDB). Government of India borrows money and the banks lend for the infrastructure in India has been increased on recent days. The transport infrastructures, energy sector, water and other infrastructures are being development with the help of schemes & funds provided by international banks to support India. However, the financial institutions have been developed the frameworks for project financing and risk management policies to protect their financial background and stability. The Financial Institutions will review the project proposal in detail prior to funding approval. This study will identify the factors that influence the project appraisal and formulation for approval, the risk management strategies adopted by the financial institution to avoid the bankruptcy project owner/ end user through various circumstance. For instance, the international banks have different procurement policies which is strategized by risk management and finance management techniques as checklist for funding approval considerations. The purpose of the paper is to pilot study the financial framework and risk management policies adopted by various banks or financial institution during project financing for the project owner and how it impacts the bidders and Engineering Procurement Construction Contractors. The Detail survey has been conducted with the Engineering Procurement Construction contractors and bidders to overview the scenario to have a project outlook from financial perspective from Bidders and contractor's end. The results show the risk management strategy of the financial institution & risk has transferred to the Bidder and contractor directly through Tender & contract clauses directly which increase the setback a chance of bankruptcy risk for the Engineering Procurement Construction Contractors if they are not properly managed their Project Management Strategies and contract management which collapse their financial stability.
Assessment of Credit Risk in Project Finance
In project finance, raising sufficient funds via the debt channel is a key task for all project companies and sponsors. Before furnishing a loan, lenders typically need to ascertain the ability of the project company to service principal payments plus interest. This paper aims to establish a quantitative model to analyze default risks and loan losses in infrastructure projects. Acting as an assessment system, the model will help lenders evaluate their exposure to default risk by monitoring the changes in credit quality of the project company. The model uses a conditional credit rating transition matrix to predict the probability of default and the net present value technique to estimate the maximum default loss. The Hong Kong-Canton highway project is used as a case study to illustrate the techniques and output of the proposed credit risk model. The model can be used to assist lenders and investors in making sound investment decisions, price contracts, and allocate capital. Similarly, it can also help project sponsors evaluate those critical measures that they must control in order to secure favorable loan terms by minimizing the risk of default and improving the bankability of a project.
The nature of credit risk in project finance
In project finance, credit risk tends to be relatively high at project inception and to diminish over the life of the project. Hence, longer-maturity loans would be cheaper than shorter-term credits. JEL classification: F34, G12, G28, G32. For decades, project finance has been the preferred form of financing for largescale infrastructure projects worldwide. Several studies have emphasised its critical importance, especially for emerging economies, focusing on the link between infrastructure investment and economic growth. Over the last few years, however, episodes of financial turmoil in emerging markets, the difficulties encountered by the telecommunications and energy sectors and the financial failure of several high-profile projects 2 have led many to rethink the risks involved in project financing.
Mitigating Factors of Financial Distress Causalities of Project Performance in Ghana
In response to bankruptcies and undesirable business performance of construction companies in Sub-Saharan African, this paper seeks to identify factors that mitigate financial distress. Findings presented will assist project stakeholders in mitigating the effects of financial distress. A quantitative research design was adopted using primary data gathered from Ghanaian contractors. A literature review was first conducted to synthesise factors that mitigate financial distress. A closed ended questionnaire was developed to collect perceptional data from contractors on the significance of the mitigation factors to financial distress factors identified within the literature review. The main analytical tools used for this study were the relative importance index (RII), Cronbach's Alpha Coefficient, and Kendall's Coefficient of Concordance. A total of 22 factors were identified and using the RII, the top three rated mitigation factors were delineated, namely, proper financial planning; practice of prompt payment by client; and proper estimation of project cost. This work constitutes pioneering research in the developing country of Ghana that must concentrate on mitigating financial distress in its construction industry.
Early warning signs for distressed projects
There are many factors that can affect a project outcome such as management practices of the contractor, involvement and response of the owner, design change and design errors, and procurement delay. It is important for contractors and owners to be able to detect and rectify project stress as early as possible. This paper presents some factors, which if present would enable contractors and owners to predict the outcome of the project. To achieve this purpose, 116 projects were researched and analyzed. The probability of a project becoming distressed is calculated using a logistic regression model, which can be applied to a project early in the bidding process. The results of this paper are of value to owners, electrical and mechanical contractors, and construction managers. Résumé : Plusieurs facteurs peuvent affecter l'issue d'un projet, tels que les pratiques de gestion des entrepreneurs, l'implication et les réponses du propriétaire, le changement dans la conception et les erreurs de conception, ainsi que le délai d'approvisionnement. Il est important que les entrepreneurs et les propriétaires puissent détecter et corriger les difficultés inattendues du projet le plus tôt possible. Le présent article présente certains facteurs qui, s'ils sont présents, permettraient aux entrepreneurs et aux propriétaires de prédire l'issue du projet. Pour réaliser cet objectif, 116 projets ont été recherchés et analysés. La probabilité qu'un projet n'éprouve pas de difficultés est calculée en utilisant un mo-dèle de régression logistique qui peut être appliqué à un projet tôt dans le processus de soumission. Les résultats du présent article sont d'intérêt pour les propriétaires, les entrepreneurs en électricité et en mécanique ainsi que les ges-tionnaires de projets de construction. Mots clés : signes de détection précoce, issue du projet, dépôt de soumissions, régression logistique. [Traduit par la Rédaction] Hanna and Gunduz 802
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Review of Financial Performance and Distress: A Case of Malaysian Construction Companies
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Using financial ratios and altman z-score, this study reviews the performance of construction companies in Malaysia before, during and after the crisis. In addition to that, this study assesses and predicts the future performance of these companies. Based on data over a sixyear period, the results have shown that the financial performance of the contractors in Hong Kong, as sampled in this study have been deteriorating very fast in the past few years. The results of all financial ratios, together with the prevailing situation of over competition, inelasticity of construction costs and reduced aggregate demand in Malaysia has revealed the extreme difficulty of reversing the financial performance in the coming years.