Currently, PPPs typically attract BBB- to BBB ratings, i.e. PPPs are structured to be at or marginally above "investment grade". This has reflected the requirement of monoline insurers that underlying projects must achieve an investment grade rating before benefiting from an AAA wrap
Several market players are advocating that higher ratings would allow many PPPs to access the "unwrapped" bond market. They consider that such higher ratings, up to A-, could be achieved through modest structural improvements, such as:
■ better completion undertakings by sponsors or third party insurers and
■ lower debt to equity ratios levels.
In practice, this could be achieved by procuring authorities requiring sponsors to bring sufficient credit support to ensure that the required rating is achieved. Procurers should, however, be aware that they may also come under pressure to modify contractual terms to improve the credit rating of projects.