As an alternative to grant funding, we have seen some countries favour the establishment of public sector colending entities such as HM Treasury's The Infrastructure Financing Unit (TIFU) in the UK. For clarity, we nothat such lending would not be viewed as a CC to the extent that funding is properly structured as pari passu debt with conventional covenants and terms, with the intention that such measures should be a temporary an reversible substitute for conventional private sector debt.
However, where public sector co-lending is provided for the long-term, with no intention or expectation of replacement, and withthe co-lending ranking pari passu with conventional private sector debt, then we may even view such co-lending as a credit positive6 on the grounds that the public sector offtaker may be less willing to allow private sector lenders to reach a default if that inevitably causes a simultaneous default on the public sector's co-lending asset.
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6 Relevant intercreditor issues would need to be addressed, to ensure that private sector funders' decision-making was not compromised.